LIVE FUTURES REPORT 25/09: Political uncertainty, economic concerns cap SHFE base metals prices; Ni down 1.2%

Base metals prices on the Shanghai Futures Exchange were mixed during the morning trading session on Wednesday September 25, with nickel leading on the downside amid lingering political uncertainty and rising concerns over economic growth in China.

Worries over an escalation of trade tension between the United States and China re-emerged following comments from US President Donald Trump at the United Nations General Assembly in New York on Tuesday, in which he said he would not accept a “bad deal” with China.

The comments from Trump come just weeks before top negotiators from both sides are due to meet in Washington, dampening any optimism of an interim trade deal being struck and sending a wave of risk-off through the markets.

More Trump-related news on Tuesday also rattled markets after US House Speaker Nancy Pelosi announced a formal impeachment inquiry against the president.

“Although the impeachment headlines have portrayed [Trump] as a Roald Dahl-Esque baddie, his comments via-a-vis China’s trade practices remain valid,” Jeffrey Halley, senior market analyst at online trading services provider Oanda, said in a morning note.

Moreover, overall market sentiment was also dented by comments from the People’s Bank of China governor Yi Gang, which suggests that further support via monetary stimulus is unlikely.

“Mr Yi said that China isn’t in a rush to add massive monetary stimulus and must maintain prudent policy stance. This dashed hopes in the market that additional support for infrastructure spending would support commodity demand,” Rahul Khare, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

As a result of the gloomier tone pervading global markets, the SHFE base metals gave a subdued performance this morning.

Nickel’s recent run of weakness continued, with the metal’s most-traded November contract tumbling to 136,870 yuan ($19,239) per tonne as at 9.19am Shanghai time, down by 1,720 yuan per tonne – or 1.2% – from Tuesday’s close of 138,590 yuan per tonne.

Nickel has come under additional pressure from subdued demand in the downstream stainless steel sector, where producers said to be making a loss of around 1,000 yuan per tonne based on the production cost of 304 stainless steel, according to Chinese industry information provide Antaike.

Meanwhile, stainless steel inventories in the Chinese cities of Wuxi and Foshan totaled around 657,800 tonnes in late August, an increase of 126,400 tonnes over July. This indicates that downstream demand has failed to pick up and this has resulted in the surplus of supply that is currently held in warehouses, according to Fastmarkets research analyst Andy Farida.

Other highlights

  • Lead was the outperformer of the SHFE base metals this morning, with the heavy metal’s most-traded November contract climbing to 16,945 yuan per tonne as at 9.19am Shanghai time, up by 195 yuan per tonne-or 1.2%- from Tuesday’s close of 16,750 yuan per tonne.
  • The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, was up by 0.08% at 98.42 as at 9.19am Shanghai time.
  • In data on Tuesday, Germany’s Information and Forschung business climate index for the August-September recorded at 94.6, beating the expected 94.5 and the previous 94.3.
  • The same day saw the United Kingdom’s public sector net borrowing for August-September improve to a surplus of £5.8 billion ($7.2 billion), well below the forecast of £6.5 billion.
  • As for US data on Tuesday, the house price index (HPI) posted a reading of 0.4%, higher than the forecast of 0.3% and the previous 0.2% respectively; the Conference Board’s reading of consumer confidence fell to 125.1, well below expectations of 134.1; and the Richmond manufacturing index disappointed at -9 versus the expected reading of 2.
  • Data of note on Wednesday include German GfK consumer climate, UK high street lending as well as crude oil inventories from the US.
  • In addition, US Federal Open Market Committee member Charles Evans and Esther George are speaking.