nickel's dive, page-2

Nickel pays the price for stalled momentum


Metals Insider - 27 June 2005



MI WEEK IN REVIEW : There are a lot of sound fundamental factors to explain why nickel fell out of bed last week.



We're now entering the seasonal low spot for demand in Western Europe and stainless mills are said to be trimming their nickel intake accordingly.



Although China's May trade figures showed the country remained a significant net importer of metal in that month, there are more and more anecdotal reports that the country is now suffering from a mini-glut after strong imports in Jan-May and steadily rising domestic production.



The level of LME-registered stocks has stabilised a bit in recent weeks. Although deliveries into the system have been offset by draws, the amount of cancelled tonnage awaiting departure has shrunk considerably.



Norilsk Nickel, the world's largest producer, has restarted operations at its export port—Dudinka—after the annual closure of navigation on the Yenisey river.



All of which is relevant but the decline last week was as much a case of lost momentum as anything else.









As the chart shows, nickel trading had been reduced to a stand-off between buyers and sellers in the week before last, while the 100-day moving average (the purple line in the chart), which has defined the market at key points since the start of the year, was catching up with the price action all the time.



It didn't take much, just a light bit of liquidation from some of the more frustrated fund longs, to send three-month nickel through the 100-day average on Wednesday. That in turn winkled out more stale long sellers and with no cushion from trade buyers, three-month metal slipped lower and through the 200-day moving average by Thursday's close at $14,870.



It was more of the same on Friday as many CTA fund players, who have stayed with nickel a long time, threw in the towel. It wasn't a full-scale rout. Our sources estimate the CTA community was still collectively long to around 25% of potential capacity on Friday but that represents a near halving of their exposure. The Friday close at $14,550 was down $1,655 from the previous week's close.



The damage could have been worse were it not that wary bears are still cautious about pushing nickel too far on the downside. LME stocks have stabilised for now but they've done so at a low level and we're still some way from any sort of short-sellers comfort zone. The same applies to the spreads. The backwardation has eased a lot over recent weeks but valued at $140 per tonne Friday, it's still not to be completely dismissed.



With little fresh “news” in the market for several weeks now, more stand-offish trading may be in store as everyone awaits some sort of clearer picture about what is happening at the fundamental level. It's just that a number of CTA players lost patience last week.


27 Jun 17:00
1999 commodity cycle to last 15 yrs: SBI
Fund Manager of SBI Mutual Fund, Sandeep Sabharwal, says that the bull market for commodities which started in 1999, should last another 15 years. When one talk about commodities, the only thing which comes into people's mind is steel. But, commodities are just not steel...>>>>

http://www.basemetals.com/

Cheers.