LIVE FUTURES REPORT 12/04: SHFE nickel prices slide on risk-averse sentiment; Al most resilient

The most-traded June nickel contract on the SHFE fell to 100,630 yuan ($14,979) per tonne as at 9.40am Shanghai time, down by 2% or 2,030 yuan per tonne from Thursday’s close of 102,660 yuan per tonne.

“A stronger [US dollar] and uncertainty around the US-China talks saw base metals come under pressure. [China and the United States] are struggling to reach consensus on important issues, despite signaling that an agreement is close,” Jack Chambers, interest rate strategist and economist at Australia and New Zealand Banking Group (ANZ), said in a morning note.

The dollar index, which measures the value of the US dollar against a basket of foreign currencies, was at 97.04 as at 09.40am Shanghai time, up from 96.92 at roughly the same time on Thursday but down slightly from a close of 97.16 yesterday following dovish language from US Federal Open Market Committee members.

“US Federal Reserve vice chairman Clarida re-emphasized the Fed’s patience, noting that core inflation is well contained and that inflation expectations are towards the low end of the range. The FOMC voting member Bullard sees no need for further rate rises and hopes that the yield curve will steepen as Q2 and Q3 data is published,” ANZ’s Chambers said.

Nickel’s more pronounced weakness this morning compared with its peers comes amid a shift in fundamentals for the metal.

According to the latest International Nickel Study Group (INSG) report, the global refined nickel market is more or less balanced. With strong global mine output having translated into higher refined output, a contraction in the deficit in 2019 is expected to show up.

The INSG report shows that the January 2019 market deficit stood at 1,000 tonnes, which is a sizeable contrast to the 17,000 tonnes deficit in 2018. The study group also reported that so far in 2019, total refined output has risen by 13.2% but metal usage has contracted by 0.8%.

Rising supply and soft demand in China is yet another headwind for prices.

“The increase in the supply of ferro-nickel has gradually speeded up recently, while the demand for it has not improved at the same pace, weighing on its price,” Chinese broker Citic Futures said on Friday.

Other highlights

• Most of the other base metals traded on the SHFE were in negative territory on Friday morning, the exception being aluminium which was little changed with a slight positive bias.
• The most-traded May aluminium contract on the SHFE climbed to 13,845 yuan per tonne as at 09.40am Shanghai time, up by 0.1% or 15 yuan per tonne from Thursday’s close of 13,830 yuan per tonne.
• In US data on Thursday, the producer price index (PPI) and core PPI were up by 0.6% and 0.3% respectively, while weekly unemployment claims were 196,000, below the forecast figure of 210,000.
• Meanwhile, China’s consumer price index (CPI) recorded a year-on-year rise of 2.3% in March, in line with expectations but up significantly from the 1.5% year-on-year gain recorded in the prior month.
• In data on Friday, a basket of Chinese and US import and export data for March is due.
• The University of Michigan will publish a series of preliminary data including US inflation expectations and consumer sentiment.
• February industrial production in the Eurozone is also worth attention.
• In addition, the International Monetary Fund and the World Bank are to hold meetings.