SHANGHAI, Jan. 29 (SMM) – In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were in the RMB 123,900-124,100/mt range, and mainstream traded prices of nickel from Russia were in the RMB 122,900-123,000/mt range. Transactions were largely done by downstream producers, which was due to lack of arbitrage opportunity and pre-holiday stock replenishment demand.
Based on result of an SMM survey on market sentiment, 40% market players believe that LME nickel prices will stabilize between RMB 17,300-17,500/mt range in the coming week, and their reasons are as follows. They believe that LME nickel prices have been fluctuating for two weeks and shall not make significant breakthrough without good news. Second, RSI indicators and the bollinger band both suggested no clear direction.
Around 30% market players expect that LME nickel prices will be weighed down by high inventories and soft demand. As of last Friday, LME nickel inventories surged to 150,216 mt, which dampened upward momentum of LME nickel prices. With regard to demand, most downstream traders were off on holiday, lowering demand and transactions for nickel. According to most producers and traders, stainless steel market is unlikely to improve before holiday, and they expect improvement after holiday. According to data from National Bureau of Statistics, China's industrial profits for December posted RMB 895.2 billion, up 17.3% YoY. However, profits for ferrous smelting and rolling fell by 37.3%, reflecting sluggishness in nickel and its downstream sectors. Therefore, pessimistic players believe that LME nickel prices are quiet likely to fall in the coming week.
The remaining 30% market players were optimistic, holding LME nickel prices will break through resistance at USD 17,550/mt, and will advance further to USD 17,700/mt. Based on SMM historical data, nickel prices were relatively firm in 1Q every year, with performance most striking in February every year. From 1987 to 2012, nickel prices rallied in February for 19 years, and only fell in February for 6 years. The 6 years seeing nickel price decline in February include Asian financial crisis in 1999, global financial crisis in 2009, and the European debt crisis in 2012. Moreover, China’s economy began to rebound, and euro zone and the US stepped output of plight, which provide upward momentum for LME nickel prices in February. A slew of economic data will be released this week, including GDP, the Fed interest rate, nonfarm employment report and PMI from China, US and the euro zone. If the data are positive, base metal prices may be pushed up.