SMM Morning Review - 2011/12/12 Nickel Market

SHANGHAI, Dec. 12 (SMM) -- LME nickel futures contract for delivery in three months opened at USD 18,150/mt and closed at USD 18,650/mt overnight, up by USD 410/mt from a day earlier, with the highest price at USD 18,675 mt and the lowest price at USD 18,045/mt. Daily trading volumes were 1,951 lots, down 1,178 lots. Positions were 112,819 lots, up by 1,486 lots from a day earlier. LME nickel inventories were down by 306 mt to 90,042 mt.

The EU summit ended last Friday. Although Britain did not agree to revise the European Constitution, the 26 out of 27 euro zone members led by Germany and France agreed on deeper European integration and stricter budget rules. News from the EU summit boosted stock market and non-US dollar currencies slightly higher. As the market has quickly absorbed the positive news, it is expected that financial market may dip further if the European debt crisis deteriorates further in the future. China’s November CPI announced on December 9th was up 4.2% YoY, lower than expectation of a 4.5% YoY growth, which fueled investors’ expectation over further loose monetary policy from Chinese government. However, China’s lower-than-expected industrial output for November suggested unoptimistic status of China's real economy. Coupled with lingering European debt crisis, the overall macro economic condition remains fragile.

During Last Friday’s Asian trading hours, LME nickel prices fluctuated narrowly above USD 18,000/mt, but advanced higher on positive news from the EU summit during the European trading hours. Coupled with improved confidence from a 6-month new high of the US consumer confidence index, LME nickel prices rallied all the way, and closed at USD 18,650/mt, up USD 410/mt from a day earlier.

Actual positive impact from the UE summit was limited since the summit only reached framework agreement. It is expected that LME nickel prices will remain fluctuation trend, and will test sustainability at 60-day moving average on Monday. Boosted by last Friday's LME nickel price rally, spot nickel prices are expected to move in the RMB 129,500-131,000/mt range on Monday.