SMM Morning Review – 2011/10/19 Nickel Market

SHANGHAI, Oct. 18 (SMM) -- LME nickel prices opened at USD 18,800/mt and closed at USD 19,163/mt overnight, up USD 308/mt from a day earlier, with the highest price at USD 19,200/mt and the lowest price at USD 18,550/mt. Daily trading volumes were 2,154 lots, up 492 lots. Positions were 92,401 lots, down 2,509 lots. Inventories were 90,438 mt, down 486 mt.

LME nickel prices rebounded from low level overnight. As China’s lower-than-expected GDP data for Q3 weakened market expectation over demand prospect from China, LME nickel prices fell to hit a low of USD 18,550/mt during the Asian trading hours. Economic data released from the euro zone and the US were both relatively optimistic during the European trading hours, boosting market sentient. In this context, LME nickel prices advanced and closed at 19,163/mt, up USD 308/mt from a day earlier.

China’s National Bureau of Statistics (NBS) said today the China GDP grew 9.1% during the third quarter, indicating that the economy stayed on a high-speed track. The worry of hard-landing did not happen. However, as China’s inflation pressure remains strong, its macro economic policies will not loosen in the short term and China’s tight liquidity may not improve. In addition, credit rating of Spain was cut down, triggering market concern over outlook of the European debt crisis. However, economic data released from the US were positive, and Goldman Sachs reported lower-than-expected losses, boosting the US equity market. In response, LME base metal prices advanced to certain extent at the tail of the trading.

It is expected that LME nickel prices will continue to fluctuate at low price level and will largely move around RMB 19,000/mt on Wednesday. Based on current condition, investors' confidence was still fragile, and will not improve considerably in the short-term. The European debt crisis and the US economic condition shall be major concerns for investors. In China’s domestic spot nickel market, the overnight LME nickel price rally may boost spot nickel prices, and SMM expects that spot nickel prices will move in the RMB 138,500-140,000/mt rang on Wednesday.