SMM Nickel Market Daily Review (2013-2-18)

SHANGHAI, Feb. 19 (SMM) --Jinchuan Group cut ex-works nickel prices by RMB 2,000/mt to RMB 128,000/mt. In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 218,700-129,000/mt, and mainstream traded prices of nickel from Russia were between RMB 127,700-128,000/mt. As most downstream producers did not resume production, transactions were sparsely made between traders. During the afternoon trading hours, spot nickel prices fell following Jinchuan Group’s price cut. Jinchuan nickel prices fell to RMB 128,000/mt and Russian nickel prices fell to RMB 127,000/mt.

Based on SMM survey result on market outlook, 40% market players hold that LME nickel prices will continue to experience correction and may fall to USD 18,000/mt or even USD 17,900/mt. First, LME nickel prices continued to grow and hit a high at 15,422 mt since April 2010. Demand for nickel was still low in the world. In addition, the GDP for 4Q in the euro zone contracted by 0.9% YoY, and 0.6% MoM. GDP contraction in Germany and France both exceeded market expectation. Finally, the US dollar index rebounded above 80.5 due to risk aversion sentiment amid weak European economy and Asian-Pacific region geopolitics impact, exerting downward pressure on base metal prices.

40% market players expect that LME nickel prices will stabilize between USD 18,000-18,300/mt in the coming week. Although LME nickel prices experienced one week’s correction, prices are unlikely to fluctuate widely before release of a slew risk events, including interest rate meeting result from major economies. It is expected that meeting minutes from central banks in Japan and the US will be of most significance on market. In Japan, market focus is on central bank president’s reappointment, which will affect Japan’s monetary policy. In the US, the improved employment data fueled expectation that stimulus polices may be exited.

The remaining 20% market players are optimistic, expecting that LME nickel prices will resume upward momentum after Chinese players return after holiday, and may return above USD 18,400/mt. Based on previous experience, downstream producers will replenish stocks after Chinese Lantern Festival. The recovered demand will help boost LME nickel prices.