LIVE FUTURES REPORT 30/01: Trade optimism buoys most SHFE base metals prices; Zn, Pb soften

The exceptions to this firmer showing were zinc and lead, both of which recorded marginal declines of 0.1% and 0.3% respectively.

The base metals have benefitted from an overall improvement in market sentiment stemming from some positive headlines regarding the US-China trade talks.

A delegation led by China’s vice premier Liu He arrived in Washington on Tuesday for a new round of trade talks with US counterparts headed by US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer.

“Signs of a deal at the US-China trade talks boosted sentiment in the base metals markets. US Treasury Secretary Mnuchin signaled a truce is possible in trade talks with China. He said that if China presents enough trade concessions there’s a chance the administration would lift all tariffs. These comments seemed to ease concerns that the talks would falter,” Richard Yetsenga, chief economist with ANZ Research, said in a morning note.

“[But] there is a long road ahead to achieving meaningful progress between the two countries and while steps forward are possible… trade uncertainty is playing a role in the [US Federal Reserve’s] decision to pause interest rate rises for the moment,” Yetsenga added.

Providing further support to the base metals prices is the soft US currency, with the dollar index easing by 0.01% to 95.80 as at 9.32am Shanghai time. The softness in the index comes amid market expectations that the US Federal Reserve will slow down its pace of interest rate rises.

On the upside, nickel outperformed its peers on the SHFE this morning, with the metal’s most-traded May contract climbing to 96,690 yuan ($14,348) per tonne as at 9.33am Shanghai time, up by 1,510 yuan or 1.6% from Tuesday’s close.

This follows similar strength witnessed on the London Metal Exchange on Tuesday, with the LME’s three-month nickel price closing up by 2.4% at $12,120 per tonne. The price gain comes against a backdrop of dwindling LME stocks.

The International Nickel Study Group (INSG) pegged a market deficit of 118,700 tonnes over the January-October 2018 period, according to. This is an increase from 86,500 tonnes in the corresponding period of 2017, while the annual market deficit for 2019 is estimated to be 72,000 tonnes due to global demand continuing to outstrip supply.

“The global demand for nickel in 2019 is set to increase by 2.8% according to Fastmarkets estimates, cooling off from the previous year’s 5.2%. The modest estimates are in line with current macroeconomic uncertainties which take into account the simmering US-China trade stand-off and the fact that global stainless steel demand should remain robust while consumption for the production of batteries used in electric vehicles is set to increase,” Fastmarkets research analyst Andy Farida said.

On the downside, zinc gave the worst performance of the SHFE base metals on Wednesday morning, with the metal’s most-traded March contract on the SHFE falling to 21,615 yuan per tonne as at 9.33am Shanghai time, down by 70 yuan or 0.3% from Tuesday’s close.

Zinc stocks at SHFE-approved warehouses rose by 5,076 tonnes to 34,510 tonnes on January 25, recording a second consecutive week-on-week gain. Stocks are now up by 23.7% since the start of the year.

Base metals prices

• The SHFE March copper contract went up by 170 yuan per tonne to 47,750 yuan per tonne.
• The SHFE March aluminium contract climbed by 85 yuan per tonne to 13,495 yuan per tonne.
• The SHFE March zinc contract fell by 70 yuan per tonne to 21,615 yuan per tonne.
• The SHFE March lead contract moved down by 50 yuan per tonne to 17,595 yuan per tonne.
• The SHFE May tin contract gained 840 yuan per tonne to 148,470 yuan per tonne.
• The SHFE May nickel contract jumped by 1,510 yuan per tonne to 96,690 yuan per tonne.

Currency moves and data releases

• The dollar index was down by 0.01% at 95.80 as at 9.32 am Shanghai time.
• In equities, the Shanghai Composite went down by 0.13% to 2,590.86 as at 10.23am Shanghai time.
• In European data on Tuesday, the Spanish unemployment rate for the fourth quarter of 2018 met expectations at 14.5%, down from 14.6% the previous quarter.
• In US releases on Tuesday, the S&P/CS Composite-20 house price index posted a 4.7% year-on-year gain in November 2018, down from 5% in the prior month. The Conference Board’s consumer confidence index fell to 120.2 in January, down from 126.6 in December 2018.
• The economic agenda is busy on Wednesday with a host of European data that includes French flash gross domestic product (GDP) and consumer spending, German GfK consumer climate, import prices and preliminary consumer price index (CPI) and UK net lending to individuals, M4 money supply and mortgage approvals.
• US releases scheduled for Wednesday include the ADP non-farm employment change, pending home sales, crude oil inventories as well as the Federal Open Market Committee’s statement, rate decision and press conference later in the day.