SMM Daily Review - 2012/7/16 Nickel Market

Shanghai, Jul. 17 (SMM) – On Monday, mainstream traded prices for Jinchuan nickel were RMB 119,500-119,700/mt in the Shanghai nickel market, and RMB 117,500-117,700/mt for Russian nickel. Quotations in the spot market were firm, along with price gains in the LME nickel market last Friday, and traders’ expectations over stocks replenishment, especially for Russian nickel.  Trading, however, was thin, as both downstream producers and traders showed no interest in building stocks.

According to a recent SMM survey of price movements this week, 50% market players expect nickel prices to remain weak, and will retreat after a brief rally. Price cuts by Jinchuan Group last week when LME nickel market staged mild declines reflected that pessimism dominated the market, especially after LME nickel hit a new low since July 2009. Meanwhile, a lower possibility of the QE3 after the latest US Federal Reserve interest rate meeting weighed down the non-US currency metals markets. LME nickel prices will hardly rebound following a stronger dollar.  More importantly, weak downstream consumption depressed market outlook, and this can be reflected by high-grade NPI output. According to an SMM survey, high-grade NPI now is down by more than 16% from May, and significant declines in NPI output suggests sluggish performance in the stainless steel industry.  Besides, imports of Russian nickel have been falling recently, sending premiums down to USD 130/mt, a sign of market caution towards the outlook.

Approximately 30% believe nickel prices will fluctuate this week, and wait for a clear direction after the release of major news. This Tuesday, the US Federal Reserve Chairman will begin Semiannual Monetary Policy Report to the Congress. Whether the introduction of QE3 or not will exert a great impact on nickel prices. Although markets expect it is a minimal possibility of the QE3 for immediate future, the US Federal Reserve may introduce other stimulus measures.  Hence, these market players believe LME nickel prices will keep fluctuating this week. 

The 20% believe nickel prices will advance this week. Although LME nickel market moved lower, LME nickel prices stayed above USD 16,000/mt. In addition, the LME option trading data shows markets are optimistic over the long-term prices.