SMM Nickel Price Forecast (Dec. 5-9)

SHANGHAI, Dec. 5 (SMM) -- On November 30th, the People’s Bank of China (PBOC) announced a cut to the reserve requirement ratio for banks by 0.5%, effective December 5th. The news immediately lifted market sentiment, helping LME nickel and other base metal prices rally. However, prices moved lower again due to weak PMI data in China and the euro zone. This would indicate China’s reserve requirement ratio adjustment only temporarily helped boost market sentiment and that any impact on financial systems and downstream industries will not be felt in the short term.

Last week, six leading central banks took coordinate action to increase market liquidity by lowering pricing on existing temporary US dollar liquidity swap lines by 50 basis points, effective December 5th. In the short term, the positive effect on the global economy will not be significant, since credit ratings in some European countries and the current weak euro zone economy will not change. In this context, base metal prices will not gain any significant support in the foreseeable future.

Currently, LME nickel prices are on a downward track, with last week’s price rallies only technical corrections. SMM expects LME nickel prices will remain soft in the coming week and may come under downward pressure to the support level of USD 16,400/mt.

In domestic nickel markets, spot prices fell below RMB 126,000/mt on Friday despite the current Jinchuan Group ex-works price of RMB 126,000/mt. Since LME nickel prices are expected to remain weak, domestic spot nickel prices are expected to move around RMB 125,000/mt, with the low-end level expected at RMB 123,000/mt.