SMM Nickel Market Daily Review (2012-10-29)

SHANGHAI, Oct.30 (SMM) -- On Monday, Jinchuan Group cut ex-works nickel prices by RMB 3,000/mt, to RMB 116,000/mt. During morning trading hours in the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group fell to the RMB 117,200-117,600/mt range, and mainstream traded prices of nickel from Russia fell to RMB 116,100-116,400/mt range. Following price cut from Jinchuan Group, mainstream traded prices of nickel from Jinchuan Group fell further to RMB 116,800/mt, and nickel from Russia fell to RMB 115,700-115,800/mt. The steady nickel price decline dampened trading enthusiasm and fueled wait-and-see sentiment. In this context, transactions were extremely quiet.

According to SMM survey on market sentiment, 60% market players believe that LME nickel prices will continue to fall and will move in the RMB 15,500-15,800/mt range in the following week. They believe that LME nickel prices lack technically support after falling below middle Bollinger bands and Fibonacci lines. LME nickel prices will not reverse trend if there is no positive news available.  In addition, the European debt crisis persisted, fueling risk aversion sentiment and sending the US dollar index higher above 8.0. This strongly weighed on LME nickel prices. In addition, market expectation towards earnings report from Chevron and Starbucks is not optimistic. Furthermore, stainless steel market was sluggish. Shipment of stainless steel by distributors for September fell to 135,800 mt, down 15.1% MoM, the lowest for the year. As of late September, MSCI stainless steel inventories increased to 408,700 mt, three times of normal monthly shipment volume. European stainless steel market is sluggish, so does China’s. Stainless steel inventories were still high in Wuxi, China, weighing down ex-works stainless steel prices from China’s major producers.  The soft demand for stainless steel is not likely to improve in the following week, which will restrict rebound of LME nickel prices.

The remaining 40% market players a adopted a wait-and-see attitude and hold that LME nickel prices will fluctuate between USD 15,800-16,200/mt in the coming week. A slew of important economic data will be released this week, including Germany’s employment data, Eurozone manufacturing PMI, the US ISM manufacturing index, China manufacturing PMI and the US non-farm employment data. China’s manufacturing PMI may suggest that China’s economy has hit bottom. However, Germany’s economic data may suggest that the Eurozone economic crisis negatively affect Germany. Therefore, it is difficult to judge price trend and LME nickel prices may remain fluctuation trend before data release.