SMM Nickel Market Morning Review (2013-3-21)

SHANGHAI, Mar. 21 (SMM) -- LME nickel LME nickel for delivery in three months opened at USD 16,601/mt and settled at USD 16,815/mt overnight, up by USD 185/mt from a day earlier, with the intraday high at USD 16,815 mt and the low at USD 16,567/mt. Daily trading volumes were 2,758 lots, up 128 lots. Positions were 110,658 lots, down 2,007 lots. LME nickel inventories were 162,306 mt, down 348 mt.

The ECB promised to help Cyprus to ease its crisis, but market concern still remained. Longs and shorts power was balanced, and LME nickel prices closed flat at USD 16,630/mt, with positions and trading volumes both down. During the Asian trading hours, Asian stock markets all strengthened, with the Shanghai Composite Index up over 2%. LME nickel prices also advanced slightly. During the European trading hours, the Fed decided to keep interest rate unchanged, which boosted LME nickel prices to close at USD 16,815/mt, up USD 185/mt from a day earlier.

The financial minister of Cyprus is seeking for EUR 5 billion 5-year loan from Russia and asks for lower interest rate for EUR 2.5 billion loans already provided by Russia. The negotiation is still underway. It is reported that the Russia may ask for many additional conditions. For example, Russia may ask a harbor from Cyprus for berth of Russian warship, or ask for exploration right of nature gas resources from Cyprus. Meanwhile, the ECB warned that if the Cyprus does not accept the deposit tax proposal, the EBC will suspend bailout fund to Cyprus.

In the US, the FOMC decided to continue assets purchasing at the pace of USD 85 billion per month unless the unemployment rate is below 6.5% and the inflationary rate is higher than 2.5%. However, it cut economic forecast for 2013 from 2.3-3.0% to 2.3-2.8%, and employment rate from 7.4-7.7% to 7.3-7.5%. Meanwhile, Bernanke said that the Cyprus problem will not threat the US economy, which boosted the US equity market to close with gains.

According to meeting minutes from the Bank of England, most committee members were not supportive for QE for the fear of depreciation of pound sterling, but three members were still for the GBP 25 billion assets purchasing. Meanwhile, the OBR cut economic growth forecast for 2013 from 1.2% to 0.6%. Possibility for the UK to adopt QE is growing. Therefore, the pond weakened versus the US dollar.

SMM expects that LME nickel prices will move between USD 16,600-17,000/mt, and Shanghai nickel spot prices will move between RMB 116,000-118,000/mt on Thursday.