SMM Morning Review – 2012/6/21 Nickel Market

SHANGHAI, Jun. 21 (SMM)-LME nickel market overnight opened at USD 17,050/mt, with the highest and lowest level of USD 17,220/mt and USD 16,930/mt, respectively. Finally, LME nickel market ended at USD 17,097/mt, up USD 17/mt from a day earlier. Transactions for the day were 3,213 lots, up 438 lots. Positions were 114,725 lots, unchanged from a day earlier. Inventories were also unchanged at 102,894 mt.

LME nickel market during Asian trading hours fluctuated narrowly after opening at USD 17,050/mt due to mixed news. The US Federal Reserve later announced to extend its "Operation Twist” through the end of year. It will add USD 267 billion more to the program in which the Fed sells some of its medium-term bonds in order to buy longer-term ones. The announcement generated mixed response in the market. On one hand, no signal of QE3 introduction depressed markets. On the other hand, the extension of "Operation Twist” program helped support market sentiment to some extent. Finally, LME nickel prices outperformed other metals, which ended lower, and finished at USD 17,097/mt, up USD 17/mt from a day earlier.

The dollar was supported after the Fed said it was extending its “Operation Twist” program to the end of year, helping the dollar turn around, but any rising room was limited, since the Fed’s decision was largely within market expectations. In this context, LME metals markets came under downward pressures.

On Thursday, HSBC will announce the preliminary PMI data, and markets expect the reading to below 50%. LME nickel prices are expected to hover between USD 16,850-17,200/mt, and weak demand will continue to weigh on domestic nickel prices, with mainstream prices between RMB 121,800-124,800/mt on Thursday.