SMM Morning Review - 2011/12/29 Nickel Market

SHANGHAI, Dec. 29 (SMM) -- LME nickel LME nickel for delivery in three months opened at USD 18,590/mt and closed at USD 17,840/mt overnight, down by USD 672/mt from a day earlier, with the highest price at USD 18,590/mt and the lowest price at USD 17,810/mt. Daily trading volumes were 1,814 lots, up by 182 lots. Positions were 106,802 lots, up by 147 lots from a day earlier. LME nickel inventories were up by 558 mt to 90,600 mt.

LME nickel prices fluctuated narrowly during the Asian trading hours, but slumped to close at USD 17,840/mt during the European trading hours overnight due to escalating concern over the European debt crisis from rising yields of Italy’s bond.

The European Central Bank balance sheet recorded EUR 2.73 trillion on December 28th, a historical high, and the yields of Italy’s 10-year bond surged to 6.95%, near alert level. Market concerned that an auction of Italy’s10-year debt scheduled for Thursday wouldn't fare as well. Amid increasing risk aversion sentiment, the US dollar advanced to 80.73, near new high in 2011, weighing on LME base metal prices lower on December 28th. Curbed by rising momentum in the US dollar, base metal prices are expected to slip significantly.

LME nickel prices extended downward momentum to fall below USD 18,000/mt overnight. Haunted by the European debt crisis, SMM expects that LME nickel prices have downward risks but will be supported at USD 17,500/mt on Thursday. In China’s nickel spot market, overnight LME nickel price decline will drag down spot nickel prices to certain extent. SMM expects that spot nickel prices will move in the RMB 126,500-129,000/mt range on Thursday.