SMM Nickel Price Forecast (Jan. 28-Feb. 1)

SHANGHAI, Jan. 28 (SMM) –

Positive Factors:

1. Japan’s central bank (BOJ) announced it was keeping interest rates unchanged and raised the inflation goal to 2%. BOJ also announced plans to purchase YEN 13 trillion in financial assets each month, including around YEN 2 trillion in financial assets and around 10 trillion in short-term bonds, with no upper limit for bond purchases. Japan’s loose monetary policy will lend long-term support to base metal prices. 

2. Over-subscription rates for Spanish 3-month and 6-month government bonds were 4.18 and 3.85, respectively, both up from the previous 2.92 and 2.57 over-subscriptions. In addition, demand for 10-year government bonds exceeded EUR 24 billion, suggesting market confidence in the euro zone is recovering and will also boost base metal prices.

3. The euro zone comprehensive PMI and initial manufacturing PMI for January rose to a 10-month high of 48.2 and 47.5, respectively. The euro zone seasonally-adjusted current-account surplus was EUR 14.8 billion, also 7 billion above expectation. The January HSBC China manufacturing PMI was 51.9, above both expectations and the previous month’s reading.

4. China’s central bank injected RMB 43 billion of liquidity into markets through 7-day reverse purchases on January 22nd, with a bidding rate flat at 3.35%. Last week’s reverse repurchases totaled RMB 150 billion, and markets expect China’s central bank to increase liquidity injections further before the Chinese New Year holiday.

Negative Factors:

1. Initial jobless claims in the US unexpectedly fell last week from 335,000 to 330,000, and was the lowest level since January 2008, fueling market expectations that the US Federal Reserve may halt QE measures early.

2. LME nickel inventories continue to surge and hit 149,718 mt last Thursday, dampening market confidence and upward momentum of LME nickel prices.

In general, the boost to markets from positive economic data was offset by high LME nickel inventories. LME nickel prices are moving in narrow range awaiting guidance. Since market sentiment is positive, LME nickel prices are more likely to advance than fall, but will still meet strong resistance at USD 17,700-17,900/mt. Therefore, any room for LME nickel prices to increase significantly will be limited.

Domestic Markets

In the Shanghai nickel spot market, transactions of spot nickel were sluggish since some steel mills have already replenished nickel stocks. However, since some traders are bullish toward prices after the Chinese New Year holiday, stock replenishment by traders may occur if nickel prices fall.