SMM Nickel Market Daily Review (2015-8-24)

SHANGHAI, Aug. 25 (SMM) – SMM #1 nickel prices were between RMB 75,900-76,400/mt. Discounts of Jinchuan nickel against the most actively traded contracts on the Wuxi electronic trading were RMB 100/mt in the morning. Jinchuan did not adjust prices yesterday, but spot nickel prices hit a new low, attracting downstream buyers to enter the market. Traders, however, stayed on the sideline due to pessimism over spot premiums, with traded prices between RMB 75,400-75,900/mt. Downstream buyers replenished stocks in the afternoon at lows, but some traders were reluctant to sell, with traded prices between RMB 75,400-76,000/mt in the afternoon.

SMM surveyed 30 market players to find that no one is bullish toward nickel price trends, 18 are neutral, and 12 are bearish.

The 60% neutral ones believe LME nickel prices will move between USD 9,700-10,100/mt, and SHFE 1601 nickel contract prices will hover between RMB 75,000-77,000/mt. Global markets deteriorate, and will hurt further should the Fed raise interest rate. The interest rate hike by the Fed is expected to be delayed, pushing down the US dollar to 94. However, yuan’s depreciation led to devaluations in emerging markets’ currencies, growing market panic. In this scenario, it is expected that China will further lower deposit reserve ratio. In China’s spot markets, Jinchuan will reduce supplies now that nickel prices fell precipitously, helping arrest some price declines.

The 40% bearish ones see LME nickel prices fall to USD 9,500-9,700/mt, and SHFE 1601 nickel contract prices down to RMB 73,000-75,000/mt. The plunge in China’s A-share market increased market panic and also affected European and US markets. China will push additional stimulus measures. However, weak demand will continue to weigh on commodity. Despite the depreciation of yuan, nickel imports surged in July. Jinchuan Group continued to lower ex-works prices, suggesting oversupply. As such, nickel prices should fall further.