LIVE FUTURES REPORT 26/11: SHFE base metals lose momentum amid risk-off sentiment; nickel prices outperform

Nickel and aluminium bucked the weaker tone seen across the rest of the complex however, with the former rising following the emergence of bargain-buying.

“The impending G20 summit has seen investors increasingly nervous about the likelihood of a deal between the US and China. This has weighed on the base metals sector,” ANZ Research said on Monday.

The Group of Twenty (G20) summit to be held in Argentina over November 30-December 1 is expected to see another meeting between US President Donald Trump and his Chinese counterpart Xi Jinping, and investors are likely to remain cautious while they wait for a clearer sign on how trade discussions between the world’s two largest economies progress.

At the same time, a firmer US currency is adding to the risk-off sentiment in the market which is pressuring the SHFE base metals prices. The dollar index, which moved up by 0.02% to 96.99 as at 9.30am Shanghai time, is off from a recent low of 95.67 on November 7.

Zinc gave the worst performance of the SHFE base metals this morning, with the metal’s most-traded January contract falling to 20,570 yuan ($2,960) per tonne as at 9.29am Shanghai time, down by 320 yuan per tonne or 1.5% from last Friday’s close.

“This round of decline in the zinc price was mainly due to the risk-aversion sentiment due to growing concerns over the trade tensions between US and China,” Citic Futures Research noted on Monday.

A negative macroeconomic backdrop, combined with zinc’s uncertain fundamental backdrop, continues to keep prices depressed for now, according to Fastmarkets research analyst Andy Farida.

In addition, stringent environmental protection measures taking place across China over winter have dampened demand for zinc, adding to the downward pressure afflicting prices.

“There is concern that galvanizing plants in Northern China could reduce their utilization rates in the coming weeks due to an escalating environmental crackdown for the winter period. Weak apparent Chinese demand among galvanizers could last indefinitely; when combined with fragile domestic business confidence, the negative demand outlook could worsen further,” Farida said.

Despite the negativity clouding the base metals markets, nickel managed to tick higher this morning after bargain-buying emerged with prices in relatively low ground.

On the supply side, SHFE nickel stocks fell by 848 tonnes to total 15,539 tonnes in the week ended November 23. Stocks on the exchange are now down by 68.2% from the beginning of the year.

“The [nickel] price was supported by the reduction in the material flowing from overseas market due to the shrinking in profits in importing the material,” Citic Futures Research pointed out.

Base metals prices

• The SHFE January copper contract price declined by 90 yuan per tonne to 49,310 yuan per tonne.
• The SHFE January aluminium contract price went up by 60 yuan per tonne to 13,835 yuan per tonne.
• The SHFE January zinc contract price dropped by 320 yuan per tonne to 20,570 yuan per tonne.
• The SHFE January lead contract price fell by 260 yuan per tonne to 18,220 yuan per tonne.
• The SHFE January tin contract price slipped by 1,730 yuan per tonne to 144,480 yuan per tonne.
• The SHFE January nickel contract price climbed by 630 yuan per tonne to 89,120 yuan per tonne.

Currency moves and data releases

• The dollar index edged up 0.02% to 96.99 as at 9.30am Shanghai time.
• In equities, the Shanghai Composite was up by 0.25% to 2,585.84 as at 9.58am Shanghai time.
• In Eurozone data on Friday, the French flash manufacturing purchasing managers index (PMI) for the October period came in lower than expected at 50.7, down from 51.2 the previous month. French flash services PMI was better at 55, topping expectations but just under September’s figure of 55.3.
• Elsewhere, the German flash manufacturing PMI reading for October was also lower than expected at 51.6, down from 52.5 previously. Similarly, German flash services PMI for the same period was lower at 53.3, from 54.7 across September.
• Meanwhile, the EU’s flash manufacturing PMI for the month of October came in at 51.5, down from 52 in September, while its flash services PMI over the same period came in at 53.1, down from 53.7 previously.
• In data on Monday, Japan’s manufacturing PMI for November was recorded at 51.8, below the previous reading of 52.9.
• Later, Germany is expected to release its IFO business climate index for November, while China’s Conference Board Leading Index is also due.
• In addition, European Central Bank President Mario Draghi and Bank of England Governor Mark Carney are speaking.