SMM Nickel Market Morning Review (2013-4-3)

SHANGHAI, Apr.3 (SMM) -- LME nickel for delivery in three months opened at USD 16,604/mt and closed at USD 16,380/mt on Thursday, down USD 308/mt from a day earlier, with the intraday high at USD 16,660 mt and the lowest price at USD 16,244/mt. Daily trading volumes were 5,508 lots, up 2,549 lots. Positions were 113,981 lots, up 701 lots. LME nickel inventories were 166,716 mt, up 1,296 mt.

Manufacture data from the US and China were both below market expectation during the period when LME market was closed, but LME nickel did not stage bearish performance when opening during Asian trading hours. LME nickel prices largely fluctuated between USD 16,500-16,650/mt after opening at USD 16,604/mt.However, downbeat manufacturing PMI from the euro zone and disappointing economic data from Germany and France weighed down LME nickel prices to USD 16,380/mt, down USD 308/mt from a day earlier.

Market focus was still on the euro zone. Cyprus announced to loosen currency control, hiking the ceiling of financial transaction from EUR 5,000 to EUR 25,000 and lower freezing amount of large depositors from 40% to 10%. In addition, Cyprus successfully will receive bailout fund from May and Cypriot financial adjustment period will be extended to 2018.

The Cypriot crisis gradually eased, but a spate of economic data from many economies was lower than market expectation, renewing market concern. Italy’s unemployment rate for February was 11.6%, slightly better than market expectation and previous reading, but PMI for March was disappointing. Meanwhile, manufacturing PMI from France, Germany and euro zone was all below 50. Besides, unemployment rate in the euro zone was 12% in March, the highest since 1995. According to European Commission, the euro zone unemployment rate will hit 12.2% in 2013, and will be 12.1% in 2014. The contracting manufacturing PMI and deteriorating employment market triggered market concern that the euro zone economic concession is expanding. 

Later, Fed official Lockhart further defended loose monetary policy and optimistically projected the US GDP growth for 2013 may exceed 2.0%. The US factory orders for February rose by 3% MoM to hit 5-month high and IBD/TIPP economic optimism for April were both better than market expectation, lending support for the US stock market and US dollar. On Tuesday, the US dollar further tested 83, exerting downward pressure on commodity market. 

Close attention should be paid to ADP employment data and HSBC’s China servicing PMI for March. SMM expects that LME nickel prices will move between USD 16,200-16,600/mt and Shanghai nickel spot prices will move between RMB 113,000-115,000/mt on Wednesday.