LIVE FUTURES REPORT 20/09: LME base metals slide at week end; nickel continues to plummet

Nickel prices fell by 5.3% at the close today as they came under pressure amid soft demand from China’s stainless steel sector. Ongoing environmental inspections across China have also dampened the price.

“Trading volumes and prices of stainless steel have both fallen recently and the risk of a build-up in stainless steel stocks has increased, which is putting a great amount of downward pressure on nickel prices,” China’s Galaxy Futures said.

The three-month copper price has also dropped a further $23 to $6,457 per tonne, it hit a low of $6,365 earlier in the day. The recent sink in copper prices has nearly totally erased August’s rally, which sent the red metal to a three-year high.

“Judging by its price action, copper is undergoing a long overdue correction,” Metal Bulletin analyst Andy Farida said.

“But so far, the pullback is considered healthy and showed no sign of panic selling. Instead, this should test how strong the underlying support is and if the dips will attract late buyers to enter again,” Farida added.

Lead prices had been climbing on support from supply tightness amid continuing environmental inspections in China but closed the week $30 per tonne lower, as zinc fell $70 to $3,031 per tonne.

The three-month tin price was the only base metal to close higher, up $75 per tonne.

“Following the soft closes last night, LME base metals and ferrous contracts in Asia continued to slide through the overnight session as risk appetite declined following North Korea’s latest response in the ongoing US/NK tensions and yesterday’s S&P Ratings downgrade of China credit,” concluded Sucden Financial.

Nickel prices plummet

• The three-month nickel price was down $585 to $10,420 per tonne. 
• Stocks increased a net 1,272 tonnes to 381,330 tonnes. 
• The International Nickel Study Group (INSG) released fresh statistics yesterday. It estimates that the global nickel market was in a deficit of 4,700 tonnes in July, bringing the January-July 2017 balance to a deficit of 39,700 tonnes, compared with a deficit of 43,000 tonnes in January-July 2016. 
• “The sell-off in LME nickel since Monday seems to be driven by long liquidation (rather than fresh selling), judging by the fall in open interest alongside lower prices,” said Boris Mikanikrezai, Metal Bulletin analyst.
• “But worryingly, yesterday’s fall in LME nickel took place amid heavy volumes, thereby reflecting a strong intensity in trading activity behind the downtrend and as such a clear conviction from longs that the sell-off in LME nickel may continue further,” he added. 
• Sherritt International Corp’s Moa mine in Cuba has resumed normal operations and production activities following a period of clean-up and restart in the aftermath of Hurricane Irma. The company expects the Moa mine to produce between 33,000 tonnes and 34,000 tonnes of finished nickel in 2017.
• “The environmental inspections have affected production of stainless steel, which in turn has seen demand for nickel decline,” Ellie Wang, senior nickel and ferro-chrome analyst at Metal Bulletin, said.

Base metals prices

• Aluminium’s three-month price dipped $13 to $2,158 per tonne. Inventories declined 5,350 to 1,294,850 tonnes, with 15,300 tonnes freshly cancelled. 
• The three-month copper price was down $23 to $6,457 per tonne. Stocks declined 2,200 tonnes to 309,050 tonnes. More than 100,000 tonnes of copper was delivered into LME-listed warehouses over the past two weeks. 
• Zinc’s three-month price was down $70 to $3,031 per tonne. Inventories declined 1,350 tonnes to 363,400 tonnes. 
• The three-month lead price was $30 lower at $2,483 per tonne. Stocks declined 425 tonnes to 161,250 tonnes. 
• Tin’s three-month price was up $75 to $20,525 per tonne. Inventories increased by 95 tonnes to 2,070 tonnes.

Currency moves and data releases

• The dollar index is down 0.17% to 92.03.
• In other commodities, the Brent crude oil spot price is up 0.44% to $56.67 per barrel. 
• Today in data, US flash manufacturing PMI came in at 53.0, above the forecast of 52.9. Flash services PMI stood at 55.1, below the economic consensus of 55.8.
• In EU data, flash manufacturing PMI was recorded higher at 58.3 from 57.4 last month while flash services PMI was also higher at 55.6 from 54.7. Belgian NBB business climate fell from -2.1 to -3.5 this month.