SMM Nickel Market Morning Review (2013-3-5)

SHANGHAI, Mar.5 (SMM) -- LME nickel for delivery in three months opened at USD 16,655/mt and closed at USD 16,543/mt on Monday, down USD 92/mt from a day earlier, with the intraday high at USD 16,739 mt and the lowest price at USD 16,492/mt. Daily trading volumes were 2,770 lots, down 1,852 lots. Positions were 115,237 lots, down 107 lots. LME nickel inventories were 160,656 mt, up 1,104 mt.

Chinese government released new stern measures to rein on real estate market. According to data announced last Sunday, China’s manufacturing business activity index was 54.5% in February, down 1.7%, MoM. These negative news triggered market concern over economic outlook, weighing down the Shanghai Composite Index by 3.65%. In response, LME nickel prices quickly fell to 5-day moving average after hitting a high at USD 16,738/mt. During the European trading hours, LME nickel prices slightly advanced on Fed’s support on loose monetary policy. Finally, LME nickel prices closed at USD 16,543/mt, down USD 92/mt from a day earlier.

The US Fed Vice Chairwoman Janet Yellen said the US inflationary rate will be lower than 2% in the interim term, and the unemployment rate will gradually fall below 7% by the end of 2014. In addition, she strongly defended the QE policies, claiming the premature ending of QE will negatively affect economic growth. Based on the newly-released economic data, the US economy is still under slow recovery. The Euro zone PPI in January annualized 1.9%, flat with market expectation but below previous reading. However, the Sentix investor confidence index for March was -10.6, far below market expectation and previous reading. Furth more, the yielding rate of the Spanish and Italian 10-year government rate rose by 4 basis points to 5.13% and rose by 8 basis points to 4.86% respectively, suggesting that marker concern over European economic recovery was still strong.

In Asian market, Japan’s February monetary base annualized at 15%, 4.1 percentages higher than previous reading, suggesting that inflationary level is growing. Meanwhile, the Shanghai Composite Index and the Shenzhen Component Index plunged by 3.65% and 5.29% respectively, suggesting that Chinese government’s new measures to rein on real estate market triggered wild concern. Besides, China’s central bank recovered RMB 910 billion liquidity through open market after Chinese New Year holiday, which exerted downward pressure on financial market.

Close attention should be paid to the National People's Congress and the Chinese Political Consultative Conference as well as non-manufacture PMI from major economies. SMM expects that LME nickel prices will move between USD 16,400-16,800/mt and spot nickel prices will move between RMB 116,000-118,000/mt on Tuesday.