LIVE FUTURES REPORT 02/12: SHFE base metals prices mixed; nickel underperforms with 0.9% drop

Base metals prices on the Shanghai Futures Exchange were mixed during the morning trading session on Monday December 2 while market participants awaited further developments in trade talks between China and the United States.

Optimism surrounding a “partial” trade deal between the world’s two largest economies being signed before the end of the year took a hit last week after United States President Donald Trump signed a bill in support of pro-democracy demonstrators in Hong Kong, a move which drew indignation from China.
“Many are waiting to see whether this will have any impact on the progress of current trade negotiations and whether the US will go ahead with tariff increases on 15 December,” ANZ Research analyst Adelaide Timbrell said in a note. “A deterioration in negotiations at this point could dampen the outlook for global growth in the year ahead.”
With that, the SHFE base metals exhibited mixed movements in the morning session on Monday.
Nickel was the clear underperformer, with the metal’s most-traded February contract sliding to 108,300 yuan ($15,398) per tonne as at 10.20am Shanghai time, down by 1,030 yuan per tonne - or 0.94% - from Friday’s close of 109,330 yuan per tonne.
This comes after the London Metal Exchange three-month nickel price slumped by 2.3% on Friday to close at $13,675 per tonne amid concerns over stainless steel demand and ongoing tension between the US and China.
“The sell-off in nickel gathered steam as the market adjusts to the Indonesian export ban,” Timbrell added. “After initially rallying more than 50% to $18,000 per tonne, the impact of ban appears not to be as great as initially thought, which has seen prices tumble.”
Indeed, availability of nickel has grown significantly, especially with China importing greater quantities of Indonesian nickel ore and concentrates before Indonesia’s ban on exports of the materials comes into effect on January 1, 2020, according to Fastmarkets analyst Andy Farida.
“Stockpiling of nickel ores in China should translate into higher nickel pig iron (NPI) production in the coming months and the impact could be felt in the first half of 2020,” he said.
“But with demand for NPI from domestic stainless steel mills still fairly tepid amid poor profit margins and elevated inventories, the question remains if NPI production might face curtailment and potentially subdued prices a little longer,” Farida added.
For the rest of the complex, most were largely rangebound, with January copper up by just 10 yuan per tonne - or 0.02% - to 47,330 yuan per tonne, and January aluminum up by 20 yuan per tonne - or 0.14% - to 13,905 yuan per tonne. January zinc declined by 125 yuan per tonne - or 0.69% - to 17,915 yuan per tonne, January lead dropped by 130 yuan per tonne - or 0.84% - to 15,260 yuan per tonne while January tin added by 180 yuan per tonne - or 0.13% - to 138,590 yuan per tonne.
Other highlights
  • The dollar index, which gauges the strength of the US currency against a basket of foreign currencies, was at 98.31 as at 10.20am Shanghai time, little changed from a similar time on Friday.
  • In data on Saturday, China’s official manufacturing purchasing managers' index (PMI) rebounded to
  • 50.2 in November, above the forecast 49.5 and unexpectedly returning to growth. The non-manufacturing PMI for the same period was similarly better than expected, rising to 54.4 versus the forecast 53.1.
  • In data today, China’s Caixin manufacturing PMI rose to 51.8 in November, slightly up from 51.7 in the prior month.
  • Later we have a host of manufacturing data out across Europe and the US.
  • Additionally, European Central Bank President Christine Lagarde is testifying before the European Parliament in Brussels, Belgium.

Sally Zhang

sally.zhang@fastmarkets.com

Published

Sally Zhang

December 02, 2019

04:13 GMT

Shanghai