After an extended break for London Metal Exchange trading (markets were closed Monday and Friday for Easter), nickel is having a lackluster showing on Tuesday, with the metal slightly lower despite some macroeconomic developments that should be price supportive.
Tuesday was the first opportunity LME traders had to react to China’s report that its economy grew by 6.9% in the first quarter compared to a year earlier. The reading topped expectations for 6.8% growth. Still, nickel was lower on Tuesday, trading in the range of 9,540-$9,725. The commodity is finding support at $9,350 and meeting resistance at $10,300. Recently, nickel has been trading sideways with the market in a wait-and-see mode when it comes to the metal’s major price driver – the mining shutdowns in the Philippines.
In absence of fresh news when it comes to the supply chain, macroeconomics and the perceptions over future steel demand are nickel’s major price influencers. That is why, on the surface, it is somewhat surprising that nickel did not have a larger reaction to the Chinese data. This is a testament to traders’ opinions on the validity of Chinese economic data. While the sentiment is that China’s economy is in fact growing, it is doubted that the world’s second-largest economy is growing at the rate the government is reporting. Also, with growth rates likely much lower than reported, concerns over growth sustainability surface. Much of China’s growth is being driven by massive credit expansion, which is not sustainable. A pullback is anticipated in the second half of the year.