SMM Morning Review - 2012/7/18 Nickel Market

SHANGHAI, Jul. 18 (SMM) – LME nickel prices overnight opened at USD 16,200/mt, with the high end USD 16,278/mt, finding support at USD 16,025/mt. Finally, LME nickel prices closed at USD 16,091/mt, down USD 85/mt. Trading volumes increased by 489 lots to 2,206 lots, and total position was 109,310 lots, down 1,864 lots. LME nickel inventories were 106,998 mt, down 132 mt.

Moody's downgraded ratings of 10 banks and 3 financial institutions in Italy by one or two notches yesterday, with the outlook negative. Germany delayed announcement whether the ESM and the new financial agreement comply with the constitution, so the ESM which could have take effect in July will be postponed by at least two months. Additional negative news was reported after opening. Moody's downgraded its outlook for global base metal industry from steady to negative, and Spanish 10-year government bond yields rose to 6.75%, while Ben Bernanke did not mention new monetary policies. In this context, LME zinc prices were weighed down, by limitedly.

LME base metals prices dropped sharply but then gained back losses, remaining fluctuating. The US Federal Reserve President Bernanke expressed in his testimony to Congress the Fed will take additional monetary stimulus to support slowing economy. He believes european debt crisis and uncertainty of US financial policies will cause financing condition to tighten, dragging down economic recovery. Bernanke's statement was in line with market expectation. Expectations of additional easing policies grew due to pessimism towards economic outlook by the Fed. The market stabilized around previous fluctuation range.

LME nickel prices should move between USD 15,900-16,400/mt today, and domestic spot nickel prices should move between RMB 117,000-119,500/mt.