LIVE FUTURES REPORT 28/11: SHFE base metals prices largely rangebound; Pb climbs 1.2%, Ni slumps

The subdued performance by the complex follows a deterioration in risk appetite following disappointing Chinese data on Wednesday as well as the signing of a bill by United States President Donald Trump that shows support for pro-democracy demonstrators in Hong Kong – a move expected to complicate ongoing trade negotiations with China.

In data on Wednesday, Chinese industrial profits fell by 9.9% year on year in October, according to data released by the country’s National Bureau of Statistics. The decline marks the steepest drop in eight months.

“Weak economic data in China quelled sentiment,” ANZ Research analyst Kishti Sen said in a morning note.

“Nickel prices came under further pressure as a slump in industrial profits in China raised concerns about stainless steel demand,” Sen added.

Indeed, nickel gave the worst performance of the SHFE base metals this morning. The most-traded February nickel contract slid to 112,700 yuan ($16,033) per tonne as at 11am Shanghai time, down by 1,300 yuan per tonne – or 1.1% – from Wednesday’s close of 114,000 yuan per tonne.

This follows a similarly weak performance by the London Metal Exchange’s three-month nickel price on Wednesday.

The other metals, bar lead, were largely rangebound while investors awaited more developments in trade talks between China and the US. But Trump’s signing of legislation aimed at supporting protestors in Hong Kong is seen by many in the market as a possible complication to securing a trade deal with China.

The Human Rights and Democracy Act mandates an annual review to check if Hong Kong has enough autonomy to justify its special status with the US.

China last week strongly condemned the move, saying it would take “forceful countermeasures” if the US presses ahead with the bill.

This led to minimal moves throughout rest of the SHFE base metals, bar lead.

January copper inched down by 30 yuan per tonne – or 0.06% – to 47,350 yuan per tonne, January aluminium edged up by 25 yuan per tonne – or 0.2% – to 13,760 yuan per tonne while January zinc slipped by 40 yuan per tonne – or 0.2% – to 18,035 yuan per tonne. January tin rose by 480 yuan per tonne – or 0.4% – to 138,660 yuan per tonne.

Lead outperformed its peers, however, with the heavy metal benefiting from price-supportive fundamentals.

The most-traded January lead contract rose to 15,480 yuan per tonne as at 11am Shanghai time, up by 190 yuan per tonne – or 1.2% – from Wednesday’s close of 15,290 yuan per tonne.

“A short-term rebound has come in the form of the sizeable market deficit that the global refined lead market has faced in 2019,” Fastmarkets analyst Andy Farida said.

“In fact, data collected by the Lead and Zinc Study Group over the first nine months of the year shows an overall deficit of 83,000 tonnes – significantly higher than the 34,000-tonne deficit seen in the corresponding period in 2018,” Farida added.

Other highlights

• The Shanghai Composite index was down by 0.25% at 2,895.87 as at 11.16am Shanghai time.
• The dollar index, which gauges the strength of the US currency against a basket of foreign currencies, stood at 98.33 as at 11am Shanghai time.
• In US data on Wednesday, core durable goods orders – which exclude transportation items – month on month for the November period improved to 0.6%, while durable goods orders over the same period were also better at 0.6%. The Chicago purchasing managers’ index for the November period remained in contraction territory at 46.3, missing an expected level of 47.2 but improving from 43.2 at the previous reading.
• In data on Thursday, the German preliminary consumer price index is of note. US markets are closed today to mark the Thanksgiving holiday.