LIVE FUTURES REPORT 26/07: SHFE base metals prices broadly down; copper, nickel buck the trend

With no major data released on Wednesday there was little to provide direction in the base metals market, which saw participants continue to focus on global trade tensions.

Despite the unexpected announcement overnight that US President Donald Trump and European Union President Jean-Claude Juncker had agreed to hold off on proposed car tariffs, and work to resolve their dispute on aluminium and steel tariffs, investors seemed less than convinced that a quick resolution was in sight.

As such, base metals prices on the SHFE were broadly down during the early session on Thursday with only copper and nickel managing to secure any gains.

Copper continues to be supported by ongoing wage negotiations at the world’s largest copper mine, Escondida. Union workers at the Chilean mine could take industrial action at the end of the month if a new labor contract is not struck.

BHP offered a bonus of 4.5 million Chilean pesos ($7,000) with no changes to base salary or schooling benefits. The union rejected the offer and signaled a strike was possible, with the existing labor deal set to expire at the end of July.

The union will officially vote on Saturday July 28 on whether to accept the deal or strike.

“Copper prices held up relatively well, as threats of strike action in Chile continued to weigh on the market,” ANZ Research noted on Thursday.

The most-traded September copper contract on the SHFE stood at 50,060 yuan ($7,386) per tonne as at 10.06am Shanghai time, up by 150 yuan per tonne or 0.3% from Wednesday’s close.

Nickel was similarly stronger during the morning session on Thursday, with a strong fundamental backdrop supporting prices.

The International Nickel Study Group (INSG) estimates the global refined nickel market was in deficit (for a 10th month in a row) of 13,100 tonnes in April 2018, bringing the January-April 2018 deficit to 52,600 tonnes. This compares with a deficit of 37,800 tonnes in the corresponding period of 2017.

The INSG expects the market to record a deeper 117,000-tonne deficit in 2018, up from the 53,000-tonne deficit projected in October 2017.

“On the demand side, stainless steel production growth has exceeded expectations so far this year but a slowing is expected in the second half due to growing trade protectionism,” Metal Bulletin analyst Boris Mikanikrezai said.

Nickel ticks up; rest weaken

• The SHFE September nickel contract rose 310 yuan per tonne to 111,230 yuan per tonne.
• The SHFE September aluminium contract moved down 55 yuan to 14,330 yuan per tonne.
• The SHFE September zinc contract dropped 125 yuan per tonne to 21,320 yuan per tonne.
• The SHFE September lead contract dipped 45 yuan per tonne to 18,775 yuan per tonne.
• The SHFE September tin contract fell 80 yuan per tonne to 145,440 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.04% at 94.45 as at 10.05 am Shanghai time.
• In other commodities, Brent crude oil was up by 0.18% at $74.39 per barrel as at 10.05 am Shanghai time.
• In equities, the Shanghai Composite slipped 0.2% to 2897.93 as at 10.25 am Shanghai time.
• In data from the European Union on Wednesday, M3 money supply was up 4.4% in June from last year – better than the expected 4% increase. Meanwhile, the German Ifo business climate reading for July was slightly better than forecast at 101.7, but was down from a previous reading of 101.8.
• US data released on Wednesday showed new home sales disappointed in June, with an increase of 631,000 against an expected 669,000. Crude oil inventories fell 6.1 million barrels in the week ended July 20, surpassing an expected drawdown of 2.6 million barrels.
• In data today, we have the European Central Bank’s main refinancing rate decision and press conference as well as data from the United States that includes core and headline durable goods orders, unemployment claims, goods trade balance, preliminary wholesale inventories and natural gas storage.
• China’s Conference Board leading index is also expected late on Thursday.