SMM Morning Review – 2011/11/10 Nickel Market

SHANGHAI, Nov. 10 (SMM) -- LME nickel prices opened at USD 18,675/mt and closed at USD 18,050/mt overnight, down USD 531/mt from a day earlier, with the highest price at USD 18,775/mt and the lowest price at USD 18,025/mt. Daily trading volumes were 1,833 lots, up 331 lots. Positions were 98,081 lots, up 254 lots. LME nickel inventories were 83,160 mt, down 480 mt from a day earlier.

LME nickel prices advanced slightly to USD 18,775/mt during the early Asian trading hours, but later fell to fluctuate below USD 18,600/mt. During the early European trading hours, LME nickel prices were weighed down to hit a low of USD 18,025/mt as the US dollar rallied amid growing risk aversion sentiment caused by worsening economic condition in Italy. Later, LME nickel prices closed at USD 18,050/mt, down USD 531/mt from a day earlier.

The negative impact from the Italian political unrest continued to expand, sending yield of Italy's government bond higher. The yields of Italy's 2-year and 5-year government bond were even higher than 10-year government bond. It was reported that benchmark of Italy’s 10-year government bond was higher than 7% to 7.5%. Coupled with unavailability of Prime Minister of Greek coalition government, the risk aversion sentient grew. In this context, the US dollar index was pushed 1% higher overnight, and the equity market in the US and Europe slipped sharply. The FTSEurofirst 300 index closed down by 1.8%, and three major indexes in the US were down by 3% on November 9th.

The economic condition in the Euro zone till worries investors, and it is expected that base metal market will continue to be weighed. In this context, LME nickel prices may slip further and will test sustainability at USD 18,000/mt. In China’s domestic nickel market, overnight LME nickel price slump will drag down spot nickel prices to move in the RMB 133,500-135,500/mt range on Thursday.