SMM Morning Review - 2012/5/18 Nickel Market

SHANGHAI, May 18 (SMM) – LME nickel prices overnight opened at USD 16,965/mt, with the high end USD 17,220/mt, finding support at USD 16,900/mt. Finally, LME nickel prices closed at USD 17,133/mt, up USD 173/mt. Trading volumes decreased by 1,188 lots to 2,182 lots, and total position was 103,647 lots, up 1,178 lots. LME nickel inventories were 105,564 mt, down 66 mt.

On Thursday, concerns over European debt crisis, slower China's demand and fragile US economy weighed down the market, and Fitch downgraded Greece's debt rating. As a result, LME nickel prices moved around USD 17,000/mt and finally closed with gains of USD 173/mt.

Fitch downgraded Greece's long-term debt rating from "B-" to "CCC", and short-term credit rating from "B" to "C". Fitch said Greece will likely be forced out of the euro zone after its rating was downgraded, and it is assured that Greece will be forced out of the euro zone if the newly formed government fails to implement austerity policies as promised, which will lead to large default. That fueled concerns of investors. The US dollar index rose for the 13th consecutive days, and closed at 81.59. Greece's and Spain's government bond yields are 28% and 6% respectively. Despite uncertainty of US economic recovery, capital flows to the US for haven as it is still safer compared to Europe and emerging markets, pushing up the US dollar index. As a result, base metal prices dropped sharply. SMM predicts pessimistic markets will push up the US dollar index, and nonferrous metals prices will not rebound recently.

LME nickel prices should test USD 17,000/mt today, and domestic spot nickel prices should move between USD 124,500-126,600/mt.