LIVE FUTURES REPORT 22/11: Weakness persists across SHFE base metals complex; copper, aluminium prices show most resistance

Investor sentiment in commodity markets has improved slightly amid the weaker dollar of late, driven by expectations that US Federal Reserve may pause its rate increase cycle, according to ANZ Research.

The dollar index hit a low of 96.04 on Tuesday, down from the peak of 97.70 reached on November 12. It was recently at 96.69 as at 9.54am Shanghai time.

That said, the weaker US currency seems to be providing little in terms of support to SHFE base metals prices, which continue to come under pressure from fears surrounding simmering trade tensions between China and the United States and the wider effects that a prolonged spat may have on global economic growth.

Nickel was the worst performer among the SHFE base metals this morning, with added concerns over a slowdown in consumption from the downstream stainless steel sector and whether anticipated demand from the electric vehicle (EV) sector may spur aggressive ramp-ups in nickel production forcing prices lower.

The most-traded January nickel contract price slid to 90,880 ($13,099) yuan per tonne as at 9.56am Shanghai time, down by 970 yuan per tonne from Wednesday’s close.

Shrinking profit margins have caused domestic stainless steel smelters in China to lower their production rates, thereby consuming less nickel, according to Fastmarkets analyst Andy Farida.

Domestic stainless steel prices in China have trended lower since the middle of October, coming under pressure from soft demand. Fastmarkets’ price assessment for China domestic grade 304 stainless cold-rolled coil in-warehouse stood at 14,800-15,500 yuan per tonne on November 21, declining steadily from a peak of 15,800-16,100 yuan per tonne on October 10.

Furthermore, an increasing number of market participants are saying that previous price hikes in nickel were partially based on the expectation of increased demand from the EV battery sector, which is unlikely to materialize in the near term, indicating that prices have risen ahead of the fundamentals.

Elsewhere, copper and aluminium were the best performers of the SHFE base metals complex this morning, managing to record gains – albeit marginal ones at the time of writing.

The World Bureau of Metal Statistics has made note of delayed Chinese trade data, which has indicated a 5% rise in copper demand from January to September this year.

“The International Copper Study Group also released data showing the market was in a deficit of 260,000 tonnes in the first eight months of the year. This compares with a deficit of 98,000 tonnes over the same period last year,” ANZ Research said.

“Copper prices appear more constructive because tightening availability has emboldened bullish sentiment,” Fastmarkets analyst James Moore said. “While upside price risks remain, wider risk-off sentiment continues to overhang. Nonetheless, we maintain that, in view of the supportive fundamentals, prices are well placed to rebound should risk-on sentiment return.”

The most-traded January copper contract price rose to 49,420 yuan per tonne as at 9.56am Shanghai time, up 10 yuan per tonne from Wednesday’s close.

Aluminium recorded a similarly small gain, with the metal’s most-traded January aluminium contract ticked up by 10 yuan per tonne to 13,755 yuan per tonne.

Base metals prices

• The SHFE January copper contract price rose by 10 yuan per tonne to 49,420 yuan per tonne.
• The SHFE January aluminium contract price ticked up by 10 yuan per tonne to 13,755 yuan per tonne.
• The SHFE January zinc contract price dropped by 140 yuan per tonne to 21,000 yuan per tonne.
• The SHFE January lead contract price fell by 75 yuan per tonne to 18,215 yuan per tonne.
• The SHFE January tin contract price declined by 1,400 yuan per tonne to 149,080 yuan per tonne.
• The SHFE January nickel contract price retreated by 970 yuan per tonne to 90,880 yuan per tonne.

Currency moves and data releases

• The dollar index was unchanged at 96.69 as at 9.54am Shanghai time.
• In equities, the Shanghai Composite was down 0.18% to 2,647.12 as at 10.51am Shanghai time.
• In mostly US data on Wednesday, weekly unemployment claims came in at 224,000 above the forecast of 215,000. Durable goods orders ticked downward by -4.4% month on month, more than the expected decline of 2.2%.
• Meanwhile, the revised University of Michigan consumer sentiment for the October period missed expectations at 97.5, falling from the previous reading of 98.3, while its inflation expectations for the same period were flat at 2.8%.
• The US CBI Leading Index for the October-November period was also lower at 0.1%, down from 0.6%.
• US commercial crude oil inventories increased by 4.9 million barrels in the week to November 16 from the previous week, beating analysts’ expectations for an increase of 2.9 million barrels. It also marked the ninth consecutive weekly rise in US crude oil stockpiles.
• The economic agenda is light on Thursday with the European Central Bank’s monetary policy meeting accounts, EU consumer confidence and a speech by Bank of England Monetary Policy Committee member Michael Saunders of note.