SMM Morning Review - 2011/12/14 Nickel Market

SHANGHAI, Jun. 14 (SMM) -- LME nickel for delivery in three months opened at USD 18,390/mt and closed at USD 18,225/mt, down by USD 75/mt from a day earlier, with the highest price at USD 18,511/mt and the lowest price at USD 18,092/mt. Daily trading volumes were 1,912 lots, down 373 lots. Positions were 113,065 lots, up by 631 lots from a day earlier. LME nickel inventories were down by 330 mt to 89,994 mt.

The Federal Reserve announced on Tuesday by a vote of 9 to 1 to keep interest rate unchanged between 0-0.25%, and reiterated to keep the ultra-low interest rate at least to mid-2013.  Fitch Ratings adjusted credit outlook of four Eastern European countries from positive to stable, fueling risk aversion appetite. In response, the European and US equity markets slumped and the euro fell to 1.3 mark, while the US dollar advanced from risk aversion buying. In addition, Germany's chancellor, Angela Merkel, stressed that the upper limit of ESM rescue fund was EUR 500 billion, dashing the possibility that the limit will be raised. At present, global financial volatility cause global economy to face huge downward risk. Haunted by the European debt crisis and hit by US dollar advance, LME base metal prices closed with losses across the board on Tuesday. It is expected that Shanghai base metal prices will continue to vacillate on Wednesday.

It is expected that LME nickel prices will be supported at USD 18,000/mt and will continue to remain fluctuation trend on Wednesday. In China’s domestic market, overnight LME nickel price decline will weigh on market sentiment. In addition, concern over the European debt crisis will fuel risk aversion sentiment and dampen investor confidence in the market. SMM expects that spot nickel prices will move in the RMB 127,500-129,500/mt range on Wednesday.