LIVE FUTURES REPORT 14/11: SHFE base metals prices all down following lackluster China data; nickel leads the decline

Data released early on Wednesday showed retail sales in China rose by 8.6% in October from a year ago, slowing from the 9.2% year-on-year gain recorded in September, according to the country’s National Bureau of Statistics. This marked the weakest growth rate since May and was well below the forecast 9.2% gain.

The slower spending growth comes at a time of increasing uncertainty amid an ongoing trade war between China and the United States.

But growth in fixed-asset investment and industrial production in China both accelerated last month, indicating that while the Chinese economy may be slowing, it is not buckling from the weight of the uncertainty surrounding the trade war.

China’s fixed-asset investment grew by 5.7% in January-October from a year earlier, faster than the forecast increase of 5.5%. Industrial production, meanwhile, rose by 5.9% in October, accelerating slightly from the 5.8% year-on-year increase seen in September and beating expected growth of 5.7%.

The mixed data was enough, however, to reignite concerns over a slowing Chinese economy and stoke a degree of risk-off among participants in the base metals market this morning and keeping investors on the sidelines.

Further exacerbating the situation was the strong dollar.

The dollar index stood at 97.06 as at 10.55am Shanghai time on Wednesday, and while this is down from a peak of 97.77 on Monday, the US currency remains near its highest level since June 2017.

As a result, SHFE base metals prices weakened across the board this morning, with nickel giving the worst performance.

Nickel’s most-traded January nickel contract on the SHFE fell to 94,100 yuan ($13,521) per tonne as at 10.55am Shanghai time, down by 1.1% or 1,600 yuan per tonne from Tuesday’s close.

“Overnight, the growing strength of the US dollar pushed the nickel price to fall below its support level. We believe that the current macroeconomic situation, coupled with lower stainless steel prices, will continue to pressure nickel prices,” Guotai Junan Futures on Wednesday.

“The Chinese stainless steel sector has weakened in recent weeks as domestic business confidence wanes, with benchmark 304 stainless cold-rolled coil in major market of Wuxi down 15,400-15,700 yuan per tonne on October 31,” Fastmarkets analyst Andy Farida said.

“This is in line with the weakening economic numbers from China, with the official manufacturing PMI showing sign of contraction,” Farida added.

China’s official manufacturing purchasing managers’ index (PMI) fell to 50.2 in October from the previous month’s reading of 50.8. This was also below an expected print of 50.6.

Base metals prices

• The SHFE December copper contract fell 170 yuan to 48,970 yuan per tonne.
• The SHFE January aluminium contract slid 45 yuan per tonne to 13,780 yuan per tonne.
• The SHFE January zinc contract inched down 20 yuan per tonne to 20,990 yuan per tonne.
• The SHFE December lead contract contracted 80 yuan per tonne to 18,395 yuan per tonne.
• The SHFE January tin contract slipped 40 yuan per tonne to 151,480 yuan per tonne.

Currency moves and data releases

• The dollar index gained 0.09% to 97 as at 10.38 am Shanghai time.
• In other commodities, the Brent crude oil spot price rose 1.1% to $70.92 per barrel as of 10.38 am Shanghai.
• In equities, the Shanghai Composite fell 0.3% to 2,646.34 as of 11.19 am Shanghai time.
• In European data on Wednesday, there is a slew of releases from the United Kingdom including the consumer price index (CPI), retail price index and producer price index. The European Union will have releases on its flash gross domestic product and industrial production.
• US data of note today includes the headline and core CPI.
• In addition, US Federal Open Market Committee member Randal Quarles and US Federal Reserve chair Jerome Powell are speaking.