SMM Nickel Update: Prices Drop on Aug 31 as US Fed Hike Expectations Rise

SMM Nickel News, August 31:

Macro and Market News:

(1) Fed Chairman Warsh: Inflation data have not shown a significant improvement in the trend; the US Fed's main focus at present should be prices; we must be convinced that underlying inflation is moving toward the target, otherwise we still have work to do. It is hard to describe financial conditions as restrictive. Market pricing shows that the probability of a US Fed interest rate hike in September is higher than the probability of keeping rates unchanged.

(2) The Ministry of Commerce responded to the US consideration of imposing additional 7.5% tariffs on China: The US side launched a Section 301 investigation into 16 economies, including China, on the grounds of "overcapacity." This politicizes economic and trade issues and is a typical unilateral and protectionist act, which China firmly opposes.

Spot Market:

On August 31, the average price of SMM #1 refined nickel was 127,250 yuan/mt, down 1,350 yuan/mt from the previous trading day. In terms of spot premiums, Jinchuan #1 refined nickel averaged 1,500 yuan/mt, up 100 yuan/mt from the previous trading day, while mainstream domestic electrodeposited nickel was in the range of -200 to 400 yuan/mt.

Futures Market:

The most-traded SHFE nickel 2610 contract continued to consolidate at lows in early trading, and as of the morning close it was at 126,750 yuan/mt, down 1.13%.

Rising expectations for US Fed interest rate hikes, a stronger US dollar, high inventory, and weak demand formed multiple headwinds. In the short term, the most-traded SHFE nickel contract price is expected to trade in a range of 126,000-131,000 yuan/mt.