SMM Nickel Market Daily Review (2013-7-1)

SHANGHAI, Jun. 2 (SMM) – In Shanghai, despite bad performance of LME nickel prices last Friday, Jinchuan nickel prices were between RMB 96,500-97,600/mt on Monday morning as cash flow tightness eased at the beginning of the month and since LME nickel prices opened higher, and imported nickel prices were between RMB 96,500-96,600/mt, both RMB 150/mt above last Friday. In the afternoon, as LME nickel prices soared, Jinchuan nickel prices were between RMB 98,200/mt, and Russian nickel prices were between RMB 97,200/mt. Transactions were brisk as large numbers of market participants see prices rebounding this week, but were mainly made among traders. Russian nickel supply was limited, while Jinchuan nickel was ample. Brands including Zhuyou were sold RMB 200/mt above Russian nickel.

A most recent SMM survey shows that 50% market players believe LME nickel prices will fluctuate narrowly between USD 13,700-14,000/mt. As both official and HSBC's June PMIs for China pointed to a sluggish Chinese economy and weak demand for base metals, LME nickel prices should continue to hover within a narrow range this week.

30% believe LME nickel prices will break through the 10-day moving average, moving between USD 14,000-14,300 /mt. LME nickel canceled warrants increased by over 4,000 mt last Wednesday, a signal that LME nickel inventories will fall. Easing China's credit tightness will encourage base metals prices to rebound. The US dollar index is expected to fall this week, and the Shanghai Composite Index will stabilize after plunging last week. The worse-than-expected US Q1 GDP will enhance expectations that the US Federal Reserve will not quit QE anytime soon.

20% believe LME nickel prices will weaken to USD 13,500-13,700/mt. The US dollar index stopped rising after closing with gains for nine consecutive days, but still moves above all moving averages. Meanwhile, China's money crunch was not fully resolved, and Chinese government's resolution to adjust economic structure enhanced as China's GDP growth slowed. In this context, demand for base metals will not improve in the near term, so nickel prices should maintain downward track.