LIVE FUTURES REPORT 20/08: SHFE base metals prices drift higher; nickel outperforms

News that a delegation from China will meet with US officials this week to work on plans aimed at ending a trade dispute between the two nations gave the base metals market some reprieve from the broad-based selling witnessed last week, with risk-on sentiment returning this morning and with it some buying.

“This has given markets some reason for optimism that a de-escalation of Sino-US trade tensions is possible one side or other of November’s US mid-term elections,” Ray Attrill, head of foreign exchange strategy at the National Australia Bank, said in a morning note.

A softer dollar has also provided support to base metals prices this morning.

Though the dollar index remains in relatively high ground, at 96.17 as at 10:19 am Shanghai time, the index is down significantly from a high of 96.99 reached on August 15.

Nickel was the outperformer during morning trading on Monday, with its bullish fundamental backdrop continuing to support prices; the metal’s most-traded November contract soared to 111,830 yuan ($16,263) per tonne as at 10.20 am Shanghai time, up by 1,740 yuan per tonne or 1.6% from last Friday’s close.

“I’ve heard the [Chinese] government is going to conduct another round of environmental inspections in the northern provinces, such as Inner Mongolia. Nickel production might be lower than expected, which would support elevated nickel prices,” a Beijing-based analyst said.

In addition, significant drawdowns in on-exchange nickel stocks are also supportive; combined stocks at London Metal Exchange- and SHFE-listed warehouses have fallen 35.8% so far in 2018, down to 264,638 tonnes as of August 17, compared with the 411,992 tonnes seen at the end of 2017.

Base metals prices

• The SHFE October Copper contract moved up 500 yuan per tonne to 48,200 yuan per tonne.
• The SHFE October aluminium contract increased 20 yuan per tonne to 14,425 yuan per tonne.
• The SHFE October zinc contract soared 220 yuan per tonne to 19,900 yuan per tonne.
• The SHFE October lead contract moved up 75 yuan per tonne to 17,420 yuan per tonne
• The SHFE September tin contract rose 1,180 yuan per tonne to 143,680 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.06% at 96.17 as at 10:19 am Shanghai time.
• In other commodities, Brent crude oil was down 0.24% at $71.59 per barrel as at 10:19 am Shanghai time.
• In equities, the Shanghai Composite soared 0.11% to 2671.93 as of 11:36 am Shanghai time.
• In data last Friday, the European Union’s final consumer price index for July came in at 2.1% – flat with expectations.
• In US data last Friday, preliminary University of Michigan consumer sentiment disappointed with a print of 95.3, compared with a forecast reading of 98.1. The Conference Board Leading Index ticked up by 0.6% in July, surpassing an expected 0.4% increase.
• In European data today, we have German producer prices and Bundesbank monthly report.
• In addition, US Federal Open Market Committee member Raphael Bostic and German Bundesbank President Jens Weidmann are speaking.