SMM Nickel Market Morning Review (2012-10-25)

SHANGHAI, Oct.25 (SMM) -- LME nickel for delivery in three months opened at USD 16,400/mt and closed at USD 16,291/mt on Wednesday, down USD 21/mt from a day earlier, with the intraday high at USD 16,430 mt and the lowest price at USD 16,250/mt. Daily trading volumes were 2,164 lots, down 1,823 lots. Positions were 113,433 lots, up 160 lots. LME nickel inventories were 127,914 mt, down 24 mt.

Although HSBC’s China PMI rose to 49.1, base metal prices still fell after brief rally. However, decline in LME nickel prices slowed down amid stronger manufacturing data from China, so LME nickel prices fluctuate narrowly for most of the time on Wednesday. The Fed meeting did not mention QE3, so most players exited market and adopted a wait-and-see attitude. Finally, LME nickel prices closed at USD 16,291/mt, down 21 mt from a day earlier.

LME base metal prices drifted lower overnight as the Fed did not signal any expansions of QE3.The Fed reserve kept interest rate unchanged, and maintained to purchase 40 billion of bonds per month. As the US election is only two week’s later The Fed’s stable operation is within market expectation. The US economy expanded moderately in recent months, however, the unemployment rate was still high. Meanwhile, the US housing market was still sluggish. Economic data released on Wednesday were mixed. China’s initial PMI released by HSBC rose to three month high at 49.1, and the US Markit PMI for October rose to 51.3.However, the Germany PMI for October contracted for six consecutive months to 45.7. The Eurozone initial PMI for October fell to 45.3, and the Eurozone composite PMI hit a 40-mont low at 45.8, suggesting that the euro zone is contracting further.

SMM expected that LME nickel prices shall continue to extend weak momentum to move between USD 16,100-16,600/mt and spot nickel prices will move in the RMB 117,500-119,500/mt range on Thursday.