Base metals prices on the Shanghai Futures Exchange were mostly up during Asian morning trading on Wednesday January 30, supported by improving market sentiment amid ongoing trade talks between China and the United States. The exceptions to this firmer showing were zinc and lead, both of which recorded marginal declines of 0.1% and 0.3% respectively. The base metals have benefitted from an overall improvement in market sentiment stemming from some positive headlines regarding the US-China trade talks. A delegation led by China’s vice premier Liu He arrived in Washington on Tuesday for a new round of trade talks with US counterparts headed by US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer.
“[But] there is a long road ahead to achieving meaningful progress between the two countries and while steps forward are possible… trade uncertainty is playing a role in the [US Federal Reserve’s] decision to pause interest rate rises for the moment,” Yetsenga added.
Providing further support to the base metals prices is the soft US currency, with the dollar index easing by 0.01% to 95.80 as at 9.32am Shanghai time. The softness in the index comes amid market expectations that the US Federal Reserve will slow down its pace of interest rate rises.
On the upside, nickel outperformed its peers on the SHFE this morning, with the metal’s most-traded May contract climbing to 96,690 yuan ($14,348) per tonne as at 9.33am Shanghai time, up by 1,510 yuan or 1.6% from Tuesday’s close.
This follows similar strength witnessed on the London Metal Exchange on Tuesday, with the LME’s three-month nickel price closing up by 2.4% at $12,120 per tonne. The price gain comes against a backdrop of dwindling LME stocks.
The International Nickel Study Group (INSG) pegged a market deficit of 118,700 tonnes over the January-October 2018 period, according to. This is an increase from 86,500 tonnes in the corresponding period of 2017, while the annual market deficit for 2019 is estimated to be 72,000 tonnes due to global demand continuing to outstrip supply.
“The global demand for nickel in 2019 is set to increase by 2.8% according to Fastmarkets estimates, cooling off from the previous year’s 5.2%. The modest estimates are in line with current macroeconomic uncertainties which take into account the simmering US-China trade stand-off and the fact that global stainless steel demand should remain robust while consumption for the production of batteries used in electric vehicles is set to increase,” Fastmarkets research analyst Andy Farida said.
On the downside, zinc gave the worst performance of the SHFE base metals on Wednesday morning, with the metal’s most-traded March contract on the SHFE falling to 21,615 yuan per tonne as at 9.33am Shanghai time, down by 70 yuan or 0.3% from Tuesday’s close.
Zinc stocks at SHFE-approved warehouses rose by 5,076 tonnes to 34,510 tonnes on January 25, recording a second consecutive week-on-week gain. Stocks are now up by 23.7% since the start of the year.
