LIVE FUTURES REPORT 31/05: SHFE base metals prices little changed following weak China data; Ni outperforms

In data on Friday, the much-awaited release of China’s official manufacturing purchasing managers’ index (PMI) for May disappointed with a reading of 49.4, significantly lower than the forecast 49.9.

April’s reading was 50.1, which was only marginally above the threshold for expansion, but May’s reading of 49.4 shows that manufacturing activity actually contracted this month.

Meanwhile, China’s non-manufacturing PMI for May was unchanged from the prior month at 54.3.

Following the release of the data, SHFE copper and lead prices dipped marginally, while those aluminium, zinc and tin nudged higher, but all were little changed from their closing prices on Thursday.

The most-traded July copper contract rose to 46,480 yuan ($6,728) per tonne as at 10.35am Shanghai time, up by 70 yuan per tonne, or 0.2%, from the previous day’s close of 46,410 yuan per tonne.

The red metal continues to contend with high availability of the material following recent deliveries into London Metal Exchange warehouses and a decline in the rate at which stocks are being drawn down in China.

Deliveries of more than 29,000 tonnes of copper into LME-registered warehouses in Europe and Asia on Thursday had pushed the LME three-month copper price down to an intra-morning low of $5,839.50 per tonne – its lowest level since September 2018. The three-month copper price did recover later in the day but failed to move back above $5,900 per tonne.

LME copper stocks, at 212,450 tonnes on Thursday, are up by 43,925 tonnes from 168,525 tonnes on April 1.

In China, a lack of bright spots in copper downstream markets, with some participants adopting a sell-in-May-and-go-away strategy, has caused the rate at which stocks in the Shanghai-bonded zone are being withdrawn to slow.

Shanghai-bonded copper stocks totaled 567,000-571,000 tonnes on May, according to Fastmarkets MB’s latest assessment. This is down just 5,000 tonnes from the previous assessment on May 6.

“The refined copper market tends to be loose at the start of the year due to seasonal factors, so we are not surprised to see a surplus of 40,000 tonnes in the first two months of the year,” Boris Mikanikrezai, Fastmarkets analyst said.

“In fact, Fastmarkets MB research analysts estimate a larger surplus of 139,000 tonnes for the first quarter of 2019,” Mikanikrezai added.

Nickel was the standout performer of the SHFE base metals this morning, with the metal’s most-traded July contract rising 460 yuan per tonne, or 0.5%, from the previous day’s close to 98,660 yuan per tonne as at 10.45am Shanghai time.

Market participants said that the strength in nickel could be a result of expectations that China’s biggest independent nickel pig iron (NPI) producer Xinhai Technology may be required to cut production while it undergoes environmental inspections. As yet, the company has not cut any production.

Other highlights

• The dollar index was up by 0.1% at 98.13 as at 10.57am Shanghai time.
• The Shanghai was up by 0.1% at 2,906.01 as at 11.30am Shanghai time.
• In data on Thursday, US first-quarter gross domestic product (GDP) growth was revised down to 3.1% from 3.2% previously, while the goods trade deficit widened marginally to $72.1 billion in April from $71.9 billion in the prior month.
• Later on Friday, there is a host of key US data including the PCE Price Index, Chicago PMI and revised University of Michigan consumer sentiment and inflation expectations.
• In addition, US Federal Open Market Committee member John Williams is speaking.