[SMM Nickel Midday Review] Nickel prices rebounded strongly on May 12, with substantive progress made in China-US trade negotiations

SMM Nickel News on May 12:

Macro News:

(1) The high-level China-US economic and trade talks were held in Geneva, Switzerland, from May 10 to 11. He Lifeng, the Chinese head of the China-US economic and trade talks and Vice Premier of the State Council, stated at a press conference held by the Chinese delegation on the evening of May 11 local time that the talks were frank, in-depth, and constructive, with important consensus reached and substantive progress made. Both sides agreed to establish a China-US economic and trade consultation mechanism. China and the US will finalise the relevant details as soon as possible and release a joint statement on the talks on May 12.

(2) After Powell reiterated last week that the US Fed would adopt a wait-and-see approach towards easing monetary policy, traders significantly adjusted their bets, expecting the benchmark interest rate to fall by less than 75 basis points (≤three interest rate cuts) in 2025, with the first interest rate cut not expected to occur until July at the earliest. Fed Chairman Powell had previously stated that due to President Trump's across-the-board tariff hikes, the risks of rising inflation and unemployment had intensified while policymakers sought greater clarity on trade policies. Of course, whether this expectation holds true will depend on the performance of US economic and inflation data in the coming weeks. Details of the China-US trade negotiations over the weekend and the consumer price index released on Tuesday may still prompt investors to re-evaluate their latest views.

Spot Market:

Today, the SMM 1# refined nickel price is 125,900-128,550 yuan/mt, with an average price of 127,225 yuan/mt, up 2,400 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan No.1 nickel is 2,000-2,300 yuan/mt, with an average premium of 2,150 yuan/mt, down 150 yuan/mt from the previous trading day. The premiums and discounts quotation range for Russian nickel is 0-300 yuan/mt, with an average premium of 150 yuan/mt, unchanged from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2506) staged a strong rebound, opening at 124,150 yuan/mt and closing at 125,930 yuan/mt as of 11:30, up 1.84%. In terms of inventory, LME nickel inventory decreased by 642 mt to 197,670 mt on May 9, while domestic SHFE warrants decreased by 867 mt to 27,808 mt, with both SHFE and LME inventories experiencing destocking.

Base metal prices generally rose on Monday as news of substantive progress in the trade negotiations between the US and China emerged, alleviating concerns about a global recession to some extent. Another reason for nickel's outstanding performance was the rumor that the Philippines planned to implement a ban on nickel ore exports starting next month, which could potentially lead to a shortage in nickel ore supply. However, SMM analysis suggests that the short-term impact on the nickel market may be more sentiment-driven, and the policy is unlikely to have a fundamental impact on the nickel industry in the short term.