LIVE FUTURES REPORT 28/11: SHFE copper prices succumb to profit-taking; weakness in nickel persists

The most-traded January copper contract on the SHFE stood at 53,620 yuan ($8,126) per tonne as of 10.19am Shanghai time, down by 150 yuan from the previous session’s close, with around 106,000 lots traded. Open interest of the contract was at around 161,000 positions, down 3,300 positions from Monday’s close.

Investors remained cautious following weakness in Chinese equities and disappointing economic data from the country on Monday and looked to lock in profits after the SHFE’s January copper contract hit 54,690 yuan per tonne – its highest since November 7.

On Monday, China’s industrial profits rose 25.1% year on year in October, lower than the 27.7% jump in September.

The slowing in growth triggered investors’ concerns about the outlook for Chinese economic growth, spurring further selling.

“[Copper came] under some selling pressure as doubts about Chinese economic outlook grew,” ANZ Research said on Monday.

“Several minor indicators suggest confidence of sales managers in several key industries has weakened in November,” the bank added.

Investors will now turn their attention to Chinese manufacturing purchasing managers’ index (PMI) data due on Thursday.

In addition, the lower tone in copper prices this morning can be attributed to the weakness seen in Asian equities overnight.

The Chinese CSI 300 closed down 1.32% after a day of consolidation on Monday, which following a sharper drop of 2.96% on November 23. Elsewhere in Asia, the Nikkei 225 closed down by 0.24% and the Hong Kong Hang Seng by 0.6% on Monday.

“Falls in equity markets have also raised concerns that liquidity will impact investor appetite in key commodity markets,” ANZ Research noted.

“Despite falling inventories on the [London Metal Exchange] lending some support to copper prices, the anticipation of a weakening in macroeconomic growth continues to weigh on the metal’s price,” China’s Citic Futures Research said on Monday.

Demand concerns keep nickel subdued

• The SHFE’s most-traded May nickel contract price fell 1,630 yuan to 92,420 yuan per tonne.
• Concerns over demand continue to weigh on prices.
• “Nickel led the sector lower as weakness in the stainless steel sector continues to override the exuberance over electric vehicles and demand for nickel-rich batteries,” ANZ Research said.
• “Sluggish downstream demand, together with steep rises in stainless steel inventory will continue to subdue nickel prices,” Citic Futures Research said.

Base metals prices

• The SHFE January zinc contract price dipped by 15 yuan to 25,005 yuan per tonne.
• The SHFE January lead contract price increased by 30 yuan to 18,330 yuan per tonne
• The SHFE January aluminium contract price dropped by 45 yuan to 14,885 yuan per tonne.
• The SHFE January tin contract price was little changed at 143,160 yuan per tonne.

Currency moves and data releases

• The dollar index was up by 0.03% to 92.92 as of 10.19am Shanghai time – the index had fallen to as low as 92.50 on Monday, its lowest since September 25.
• In other commodities, the Brent crude oil spot price dropped by 0.12% to $63.65 per barrel while the Texas light sweet crude oil spot price was down by 0.21% to $57.73.
• In equities, the Shanghai Composite was down by 0.3% to 3,312.17.
• In data on Monday, new home sales in the United States climbed 6.2% to a seasonally adjusted annual rate of 685,000 in October, recording the highest in the last ten years.
• The economic agenda is busy today with German import prices and GfK consumer climate, the United Kingdom’s bank stress test results, Bank of England (BOE) financial stability report and Financial Policy statement and European Union M3 money supply and private loans data.
• There is also a raft of US data including the goods trade balance, preliminary wholesale inventories, house prices, the Standard & Poor’s/Case-Shiller house price index, CB consumer confidence and the Richmond manufacturing index.
• In addition, there are a number of officials speaking today including BOE governor Mark Carney, US Federal Reserve chair designate Jerome Powell, US Federal Open Market Committee member William Dudley and US Treasury Secretary Steven Mnuchin.