SMM Morning Review - 2011/8/5 Nickel Market

SHANGHAI, Aug. 5 (SMM) -- LME nickel LME nickel for delivery in three months opened at USD 23,950/mt and closed at USD 23605/mt overnight, down by USD 315/mt from a day earlier, with the highest price at USD 24,050/mt and the lowest price at USD 23,425/mt.  Daily trading volumes were 3,577 lots, down by 653 lots. Positions were 90,615 lots, down by 957 lots from a day earlier. LME nickel inventories were down by 120 mt to 102,780 mt.

On Thursday, LME nickel prices were relatively stable during the early Asian trading hours, but began to slipped all the way to close at USD 315/mt during the afternoon Asian trading hours. Market concern over expansion of the European debt crisis dampened sentiment in the commodity market, fueling risk aversion sentiment. In response, the US dollar surged to 75,366, weighing significantly on base metal prices. Economic data announced from the US on Thursday were lower than expected, failing to ease market sentiment.

The European Central Bank decided to hold interest rate unchanged at 1.5%, ending a round of interest rate hike period which was started from April. The European Central Bank also provided a new around of capital to commercial banks, but still failing to ease market concern over expansion of the US debt crisis. Pessimistic statement from ECB president Trichet intensified market concern over economic growth in the euro zone. In this context, market tumbled and euro also slipped.

According to data from the US, July’s retail sales rebound and last week’s initial jobless claim reduced, but these data still failed to ease bearish sentiment.

Stock market reported largely scale sell-offs, with stocks in energy sector leading decline. Latest Dow Jones Industrial Average was 11,600 points, down by 300 points.

LME nickel prices moved lower after a low open, and will test sustainability at 60-day moving average. It is expected that LME nickel prices face risks to fall further, with market waiting for result of US non-farm employment data. In the Shanghai nickel spot market, soft demand, coupled with bearish LME nickel price, spot nickel prices will fall further and will move in the RMB 176,000-177,000/mt on Friday. Close attention should be paid whether or not Jinchuan Group will adjust ex-works prices today.