London nickel futures extended their decline in Asian trading on Friday, but a sharp sell-off in London on Thursday had only a limited impact on Shanghai metal futures. Shanghai copper lost less than 0.5 percent after a 2 percent drop in LME copper narrowed the potential losses faced by importers.
The most active contract, October, ended the morning session at 61,050 yuan ($8,946) a tonne, down 280 yuan. A steepening backwardation in Shanghai is a sign that the spot market is finally tightening, after dismal demand brought June imports to their lowest level since November 2006.
The premium of Shanghai spot copper prices over futures prices has risen to 320 yuan ($46.89), up about $10, while the discount of Shanghai futures to LME, including tax, has narrowed to half what it was in early July. Shanghai futures need to be at a premium to LME futures for imports to be profitable.
Nickel fell to $18,700 in Asian trading on Friday, as weak stainless steel demand helped the contract pierce both $20,000 a tonne and $19,000 a tonne on Thursday. Nickel futures have lost 15 percent this month. But Chinese nickel prices are still higher than international prices, implying that imports could pick up in the near future. Shanghai zinc futures fell 1.5 percent, pressured by ample supply, but London zinc held steady.
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