Major SHFE non-ferrous metals futures decline on week

By the end of the daytime trading session on Friday, the most-traded nickel contract for May delivery had fallen by 6% from a week earlier to end at Yuan 132,330/tonne ($19,069.8/t). Meanwhile, the most-traded March aluminum and copper contracts had dropped by 5.1% and 3.5% on week, closing at Yuan 23,315/t and Yuan 100,100/t respectively.

The declines in SHFE non-ferrous metals futures were largely associated with a strengthening U.S. dollar and weak domestic demand, as inventories continued to build over the week, according to market analysts.

The U.S. Dollar Index rose steadily this week, closing at 97.82 on February 5, higher by 0.83 percentage points from a week earlier. A stronger dollar normally raises the cost of U.S. dollar-denominated global commodities, putting downward pressure on domestic non-ferrous metals futures, market analysts said.

At the same time, inventory accumulation of major non-ferrous metals has persisted since early January, reflecting subdued consumption ahead of the Chinese New Year holiday in mid-February. This inventory build-up has dampened market participants' expectations for near-term demand for the metals – both before and after the holiday.

This week, stocks of the three metals held in SHFE-bonded and standard warehouses recorded notable increases. As of February 6, aluminum inventories had jumped by 13.1% from the previous week to 245,140 tonnes. Similarly, copper and nickel inventories had increased by 6.8% and 3.7% on week to 248,911 tonnes and 57,457 tonnes, respectively.

Written by Iris Pang, pangjunyu@mysteel.com