LIVE FUTURES REPORT 31/05: Nickel leads SHFE base metals prices higher

The most-traded July nickel contract price on the SHFE stood at 113,950 yuan ($17,741) per tonne as at 09.40 am Shanghai time, up by 2,300 yuan per tonne from Wednesday’s close.

Positive Chinese data released earlier this morning has boosted market sentiment, leading to a pick-up in investors’ appetite for the base metals.

China’s manufacturing Purchasing Managers’ Index (PMI) for May surprised to the upside with a reading of 51.9, surpassing an expected print of 51.4, according to data from China’s National Bureau of Statistics. A reading above 50 indicates expansion; a reading below signals contraction.

Meanwhile, China’s services PMI for May was broadly in line with expectations, narrowly beating an expected print of 54.8 with a reading of 54.9.

Providing further support to the base metals this morning was the weaker dollar of late.

The US dollar index has weakened substantially since reaching a peak of 95.03 on Monday – its highest since November 2017. The index was at 94.05 as at 11.07 am Shanghai time, little changed from its close on Wednesday.

In nickel, declining stocks have also provided an additional boost to prices, while firm demand from the electric vehicle (EV) and stainless steel sectors continue to compound a broadly bullish environment for the metal.

London Metal Exchange nickel inventories fell a net 2,706 tonnes to 292,098 tonnes on Wednesday. Meanwhile, nickel inventories at SHFE-listed warehouses fell 714 tonnes week on week to 32,286 tonnes as of May 25.

“Nickel in particularly has returned to favor with investors, as the dynamics of weak supply growth amid signs of stronger demand from the EV market has spurred buying,” ANZ Research said.

“There is growing stainless-steel demand in China and nickel is also an important component in the ever-increasing production of car batteries for electric vehicles,” Andy Farida, analyst at Metal Bulletin, said.

“As such, any price weakness in the nickel complex may be a temporary phenomenon while dips are highly sought-after, we feel,” he added.

Other base metals prices tick higher

• The SHFE July copper contract price rose 470 yuan per tonne to 51,250 yuan per tonne.
• The SHFE July aluminium contract price edged up 30 yuan per tonne to 14,720 yuan per tonne.
• The SHFE July zinc contract price increased 430 yuan per tonne to 24,390 yuan per tonne.
• The SHFE July lead contract price gained 175 yuan per tonne to 20,010 yuan per tonne
• The SHFE September tin contract price climbed 2,450 yuan to 155,750 yuan per tonne.

Currency moves and data releases

• The dollar index was little changed from Wednesday’s close at 94.05 as at 11.07am Shanghai time.
• In other commodities, the Brent crude oil spot price was down 0.47% to $77.47 per barrel as at 11.07 am Shanghai time.
• In equities, the Shanghai Composite was up by 0.80% to 3065.51 as at 10.01 am Shanghai time.
• In US data on Wednesday, the ADP non-farm employment change disappointed with an increase of 178,000 jobs from April to May. This compared with an expected increase of 191,000. The preliminary gross domestic product (GDP) for the first quarter of 2018 was also softer than expected, increasing at an annualized rate of 2.2% against expected growth of 2.3%.
• The economic agenda is busy today with data already out showing China’s manufacturing PMI for May surpassed expectations at 51.9 – 51.4 had been called for. Meanwhile, the services PMI stood at 54.9 in May, from 54.8 in April.
• Later, we have UK net lending to individuals, EU core and flash consumer price indices (CPI) as well as US data that includes the core PCE price index, personal spending, unemployment claims, the Chicago PMI and crude oil inventories.
• In addition, US Federal Open Market Committee members Raphael Bostic and Lael Brainard are speaking.