LIVE FUTURES REPORT 18/10: Most SHFE base metals prices dip on firmer dollar; zinc shows some strength

The broad-based weakness in the base metals follows a rebound in the dollar after the minutes from the US Federal Open Market Committee’s (FOMC) September meeting implied a further interest rate rise in December.

“[The] FOMC minutes revealed a number of officials want to push above neutral in order to minimize the risk of inflation running above 2% and ‘significant financial imbalance’,” ANZ Research noted on Thursday.

“The FOMC minutes implied a high possibility of a fourth interest rate increase this year in December, which caused the dollar to strengthen and in turn put downward pressure on base metals prices,” Citic Futures Research said.

The dollar index stood at 95.66 as at 10.17am Shanghai time, up from 95.12 at roughly the same time on Wednesday.

Nickel was the worst performer among the base metals this morning, with the metal’s most-traded January contract on the SHFE falling to 101,660 yuan ($14,677) per tonne as at 11.16am Shanghai time, down by 1,480 yuan per tonne from Wednesday’s close.

Adding further downward pressure to nickel prices is the adequate supply of the metal at downstream Chinese stainless steel mills, market participants told Fastmarkets MB.

“The abundance of supply [of nickel] in the domestic market weighed on the price of the metal with some market players expanding their production capacity. And the inflow of nickel from Russia further increased supply,” Citic Futures Research said.

Zinc showed the most strength this morning, benefitting from a positive fundamental backdrop.

The most-traded November Zinc contract on the SHFE recorded at 22,560 per tonne, up 175 yuan per tonne from Wednesday’s close.

“Zinc’s fundamental backdrop remains fairly price supportive; the International Lead & Zinc Study Group now pegs the global refined zinc market in a deficit of 32,500 tonnes in July and the total deficit in the first seven months of 2018 now stands at 42,000 tonnes, which reflects increased tightness. The market deficit in the first seven months of 2018 should prompt further drawdowns of zinc metal from on-exchange stocks level and provide some support for [zinc prices],” Fastmarkets MB analyst Andy Farida said.

Base metals prices

• The SHFE January nickel contract fell by 1,480 yuan per tonne to 101,660 yuan per tonne.
• The SHFE November zinc contract ticked up by 175 yuan per tonne to 22,560 yuan per tonne.
• The SHFE November lead contract was down by 60 yuan per tonne to 18,610 yuan per tonne.
• The SHFE January tin contract slipped by 300 yuan per tonne to 148,300 yuan per tonne.
• The SHFE December copper contract edged up by 10 yuan per tonne to 50,170 yuan per tonne.
• The SHFE December aluminium contract slid by 170 yuan per tonne to 14,130 yuan per tonne.

Currency moves and data releases

• The dollar index kept flat at 95.66 at 10.17am Shanghai time.
• In other commodities, Brent crude oil was down by 0.3% to $79.98 per barrel at 10.17am Shanghai time.
• In equities, the Shanghai Composite was down 1.99% to 2,510.62 at 11.30am Shanghai time.
• In European data on Wednesday, the United Kingdom’s consumer price index (CPI) disappointed with a 2.4% gain, against an expected rise of 2.6%. The European Union’s core and headline CPI were both in line with expectations with prints of 0.9% and 2.1%.
• In US data on Wednesday, building permits missed to the downside with a print of 1.24 million, compared with an expected reading of 1.27 million. Housing starts were marginally lower than expected at 1.20 million.
• The economic agenda is fairly light today with US releases of note that include the Philly Fed Manufacturing Index, unemployment claims and the Conference Board Leading Index.
• In addition, FOMC member Randal Quarles is speaking.