SMM Morning Review - 2010/2/22 Nickel Market

SHANGHAI, Feb. 22 (SMM) -- On February 19th, LME nickel prices opened at USD 20,300/mt and closed at USD 20,650/mt, with the highest level at USD 20,735/mt and the lowest level at USD 20,050/mt. Daily trading volumes were 19,850 lots and positions were 92,247 lots.

US economic data were positive last week, stimulating recovery of commodity prices. According to public announcement from New York Federal Reserve released on February 16th, growth speed of manufacturing activities accelerated. According to report from US Department of Commerce on February 17th, construction of new home increased by 2.8% MoM, and an annual estimation of 591,000 sets new home based on current level, which is the highest level since July of 2009. According to report from the US Conference Board on February 18th, US leading economic index increased 0.3% in January, and the index kept on rising for 10 consecutive months, showing that US economy is under stable recovery.

The potential risk of price increases of commodities that are stimulated by much favorable economy data is also emerging. According to report from US Department of Labor on February 18th, US PPI in January increased by 1.4% MoM after seasonal adjustment. Although US economy didn't under threat of inflation since US CPI in January which is released on February 19th dropped by 0.1% MoM, rapidly increased commodity prices will exert negative impact on recovery of vulnerable economy. This is the major reason why Bernanke adjusted the previously consistent loose monetary policy to counter economic crisis. Federal Reserve announced on February 18th that bank emergency lending rate shall be increased by 0.25 percentage points. The control of commodity price hikes which were propelled by excess liquidity may be the focus of policies adopted by various countries. How to curb the rapid growth of commodity prices without exerting negative impact on the recovery of real economy will be an extremely sensitive and skill-requiring problem. 

It is expected that LME nickel prices will continue to fluctuate at high levels today as market transactions will be resumed in China after the Chinese Spring Festival, with prices moving in the USD 20,300-20,900/mt range.

To contact the writer on this report: anglelawang@smm.cn

 
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