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SMM Morning Review - 2011/7/22 Nickel Market
Jul 22,2011 10:02CST
data analysis
SMM expects spot nickel prices will move in the RMB 174,800-175,300/mt range on Friday.

SHANGHAI, Jun. 22 (SMM) -- LME nickel LME nickel for delivery in three months opened at USD 24,050/mt and closed at USD 23,710/mt, down by USD 100/mt from a day earlier, with the highest price at USD 24,130/mt and the lowest price at USD 23,710/mt. Daily trading volumes were 1,985 lots, up by 380 lots. Positions were 85,724 lots, up by 706 lots from a day earlier. LME nickel inventories were down by 354 mt to 101,574 mt.

LME nickel prices began to slip after slight advance during the morning trading hours and hit a low of USD 23,710/mt, which was weighed down by stronger US dollar and pessimistic expectation of PMI from China. The EU summit reached an agreement for a new Greek bailout plan overnight, easing market concern and boosting base metal prices. In response, LME nickel prices advanced to hit of high of USD 24,130/mt and pared certain gains at the tail of the trading, with prices closing at USD 23,900/mt, down by USD 100/mt from a day earlier.

HSBC said that its preliminary purchasing managers index (PMI) fall to 48.9 percent in July, down 1.2 percentage points from June's index of 50.1 percent. A reading above 50 percent indicates economic expansion, while a reading below 50 percent indicates contraction. This month's reading marks the first time for the index to drop below 50 percent since July 2010, and the lowest since March 2009, HSBC said.

The EU summit draft showed that the European Financial Stability Facility (EFSF) would provide loans at lower interest rate and longer term to Greece, Ireland and Portugal. According to the draft, term for the loans would be extended from 7.5 year to at least 15 year, and interest rate would be also cut from current 4.5%. It is expected that lending rate to Greece and Portugal will be cut to around 3.5%. The EU leaders also said that any selective default for Greece is possible.

In addition, Standard and Poor’s warned to cut the US credit rating, dampening market sentiment.
LME nickel prices closed below USD 24,000/mt overnight, a reflection of weak momentum, and have risks to fall slightly in the short term amid unsolved EU and US debt issues. SMM expects LME nickel prices will fluctuated with weak momentum on Friday. In domestic nickel spot market, prices lowered slightly, but tight supply will lend support to spot nickel prices to certain extent. SMM expects spot nickel prices will move in the RMB 174,800-175,300/mt range on Friday.


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