SMM Nickel Market Daily Review (2013-6-24)

SHANGHAI, Jun. 25 (SMM) – In Shanghai, Jinchuan nickel prices were between RMB 97,900-98,100/mt, and imported nickel prices were between RMB 96,900-97,100/mt. Transactions were muted in the afternoon, and prices of Jinchuan nickel and Russian nickel remained unchanged from the morning session. Downstream buying interest was low due to pessimism. Prices in Wuxi were close to LME nickel prices, lacking arbitrage opportunities. Spot prices in Shanghai have fallen below RMB 100,000/mt, so Jinchuan will unlikely lower nickel prices further.

A recent SMM survey shows that 50% of market players are neutral towards LME nickel prices, believing LME nickel prices will hover between USD 13,630-14,000/mt due to three reasons. First, Ben Bernanke's statement that the US Federal Reserve will scale back QE3 pushed up the US dollar index, pushing investment capital out of emerging countries and weighing down base metals prices. Second, China's June PMI and power generation volume figures pointed to a sluggish Chinese economy and weak demand. Third, Chinese leadership expressed they will put off liquidity injection, so China's cash flow tightness will not ease soon. In this context, nickel prices will continue to fluctuate weakly. SMM anticipates LME nickel prices should move between USD 13,630-14,000/mt.

20% believe LME nickel prices will rise to USD 14,200/mt. As nickel prices fall and since NPI prices rise, stainless steel plants are expected to shift to nickel, giving support to nickel prices. Russian nickel will remain popular due to low prices and tight supply this week. Chinese government will likely inject liquidity in the near term. The improving euro zone economy is expected to activate the market.

30% believe LME nickel prices will continue to fall below USD 13,630 /mt this week. They base their opinion on negative news worldwide. Layoffs in Morgan Stanley's commodity department, soaring overnight interbank offered rate of Bank of China and shadow banking problems show a potential financial crisis. Demand for nickel weakens in 2013 due to the price advantage of NPI over nickel. Although spot nickel prices have been falling since June, they are still higher than NPI. Rising NPI prices in late June also reflects a weakening demand for nickel.