[SMM Analysis] what is the purpose of LME inventory reduction pickup boss

SMM10, 12 March:

Source: SMM

Source: SMM

As of October 11, 2019, LME inventory has fallen to a record low of 98600 tons in nearly seven years, including about 90, 000 tons of nickel beans and about 8000 tons of nickel plates. Since October 1, 2019, LME inventories have fallen by an average of 6600 tons per working day and nearly 60, 000 tons in nearly nine working days. The proportion of LME write-off warehouse receipts has been as high as 60%, although there has been a decline in the past two days, but the overall is still around 50%. LME inventory level and high write-off inventory proportion, resulting in the disk is more vulnerable to the risk of squeezing.

With regard to the substantial reduction in inventory in the market, it is generally believed that it is the work of a large domestic steel mill, the exact purpose of which is unknown for the time being, but there are two possibilities for analysis:

Possible one: the early disk long still did not leave the market, through the inventory impact, attract the long into the market, or short positions, their long positions can leave the market, to avoid the disk as a result of long positions profit-taking caused by the sharp fall. After the cash transfer, the possibility of smashing the market in a short period of time is low, continue to store invisible inventory in a short period of time, pledge or consumption or has other plans and see.

Possible two: through the control of inventory, forced position surface, leading to a new round of rise.

Therefore, it is possible for nickel prices to maintain a strong operation in a short period of time, and from the previous technical step back, the lower 135000 level shows strong support.

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