SMM Morning Review - 2011/8/3 Nickel Market

SHANGHAI, Aug. 3 (SMM) -- LME nickel LME nickel for delivery in three months opened at USD 24,650/mt and closed at USD 24,700/mt overnight, up by USD 65/mt from a day earlier, with the highest price at USD 24,850/mt and the lowest price at USD 24,451/mt. Daily trading volumes were 2,112 lots, down by 1,718 lots. Positions were 90,947 lots, up by 61 lots from a day earlier. LME nickel inventories were down by 156 mt to 102,942 mt.

LME nickel prices were relatively firm compared with other base metal. Although LME nickel prices fell to hit a low of USD 24,450/mt, prices managed to hold above 5-day moving average after volatile performance. Rekindled concern that the EU debt crisis may spread to Spain and Italy dragged down the euro and sent the US dollar higher, heavily weighing on base metal prices. In addition, manufacture data from the US, China and EU were all downbeat. Many uncertainties haunted market.

The US Department of Commerce announced on Tuesday that June's personal income increased by 0.1%, while previous estimation was up by 0.2%. Revised personal income for May was up by 0.2%, while the previous reading was an increase by 0.3%. June's personal spending was down by 0.2% MoM, the largest decline in recent two years, while previous estimation was up by 0.2%.  Revised personal spending for June was up by 0.1%, flat from previous reading.

Market has been closely watching progress of the US debt ceiling negotiation. However, as the US lawmakers reached a deal of raising the US debt limit, the US debt crisis shall not be closely focused by market any more and concern over the EU debt issue will be rekindled. Lower-than-expected manufacture data from major economies and economic uncertainties dampened market confidence.  LME nickel prices declined after a low open on Wednesday, suggesting market sentiment was weighed to certain extent. SMM expects LME nickel prices will fall slightly from a day earlier. If prices falls below support level of USD 24,300/mt, LME nickel prices may fall further to around USD 24,000/mt. Shanghai nickel spot prices are expected to slip slightly to between RMB 179,000-180,000/mt on Wednesday.