SMM Nickel Market Daily Review (2013-2-25)

SHANGHAI, Feb. 26 (SMM) -- During the morning trading hours in the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 120,200-120,400/mt, and mainstream traded prices of nickel from Russia were between RMB 119,200-119,400/mt. However, as LME nickel prices fluctuated lower during the afternoon trading hours, Jinchuan Group nickel prices fell to RMB 120,000/mt and Russia nickel prices fell to RMB 119,000/mt. As downstream producers have not fully resumed production, and since arbitrage opportunities were limited, transactions were still quiet in the market. 

Based on result of an SMM survey on market sentiment, 60% market players believe that LME nickel prices will stabilize between RMB 16,000-17,000/mt range in the coming week, and their reasons are as follows. First, this week is the last week before the US automatic spending takes effect, which will trigger fluctuation in the market. In addition, the exit of QE measures in advance will also arouse market attention. On the macroeconomic news front, the GDP from the US, CPI and PMI from major economies will be released soon, which will affect base metal price movement. It is expected cautious sentiment will prevail before data release. Based on previous experience, nickel prices are likely to fluctuate in narrow price range after steep decline. 

20% market players believe that LME nickel prices will resume downward pressure and may fall below USD 16,600/mt in the following week. Currently, LME nickel prices have almost fallen below all moving averages, and meet strong resistance to advance further. Furthermore, conditions in the euro zone were not optimistic. Last Friday, the European Commission cut economic forecast for the euro zone from 0.1% to negative 0.3%. Meanwhile, 356 banks in the euro zone paid back 61.1 euro for second round LTRO, far below EUR 122.5 billion expected. Moreover, risk aversion sentiment grew amid weak condition in the euro zone and unimproved demand from China, which sent the US dollar index to 81.5, exerting downward pressure on LME nickel prices. 

The remaining 20% market players are optimistic towards market outlook, believing LME nickel prices will return above USD 17,000/mt or USD 17,200/mt. The bullish players were optimistic towards downstream demands, as downstream producers will resume production after Chinese Lantern Festival. In addition, orders from the European stainless steel have improved slightly compared to Q4 2012. Furthermore, the US will announce a slew of economic data, including new housing starts and ISM manufacturing index, which may push up the US equity market and LME nickel prices.