[SMM Nickel Midday Review] Nickel prices consolidated with a slight decline on September 7, as US August nonfarm payrolls far exceeded expectations

SMM Nickel, September 7:

Macro and market news:

(1) US August nonfarm payrolls far exceeded expectations, reigniting expectations for a September rate hike. August nonfarm payrolls added 162,000 jobs (vs. expectations of only 56,000), the unemployment rate held steady at 4.1%, and data for the prior two months were revised upward. CME FedWatch showed the probability of a 25 bp rate hike in September rose from 49.4% to around 60%. Societe Generale expects the US Fed to begin a cycle of one rate hike per quarter for three consecutive quarters starting in September. Last Friday, US stocks snapped a two-day winning streak and closed lower across the board (S&P 500 -0.38%), the 2-year Treasury yield hit 4.42% intraday (the highest since January 2025), and gold fell more than 2% intraday before recovering most of its losses, closing down 0.96% at $4,430/oz.

(2) The US-Iran conflict escalated further, and oil prices posted striking weekly gains. Iran attacked a US aircraft carrier with ballistic missiles (the US said it successfully evaded them), and US forces struck back, hitting three Iranian oil tankers. Iran warned it would declare a "no-go zone" in the Strait of Hormuz in the coming days. Last week, Brent crude rose 8% cumulatively and WTI rose 10%, while US diesel prices hit a record high. On Monday, crude oil gapped higher at the open, with WTI briefly up more than 1% at $92.57/bbl. However, a "three-day ceasefire" between Russia and Ukraine was reached under US shuttle diplomacy, and geopolitical risk premiums diverged.

(3) Copper prices remained strong, while the base metals complex diverged. LME copper rose for a 10th consecutive week, approaching the record high of $14,527/mt, while nickel remained persistently weak within the complex. This week, focus shifts to the US August CPI release on September 11, the final decisive data point before the September 15-16 FOMC meeting.

(4) Domestic fiscal policy gained momentum. The Ministry of Finance will soon issue 300 billion yuan in special government bonds to support capital increases totaling 360 billion yuan for eight central financial enterprises to replenish core Tier 1 capital. The central bank conducted 500 billion yuan in outright reverse repo operations on Monday. China's logistics industry prosperity index for August came in at 50.9%, up 0.5 percentage points MoM.

Spot market:
On September 7, SMM #1 refined nickel averaged 128,500 yuan/mt, down 550 yuan/mt from the previous trading day. In terms of spot premiums, Jinchuan #1 refined nickel averaged 1,650 yuan/mt, flat from the previous trading day, while mainstream domestic brands of electrodeposited nickel ranged from -200 to 500 yuan/mt.

Futures market:
The most-traded SHFE nickel contract (2610) moved sideways in a narrow range in the morning session, closing the morning at 127,990 yuan/mt, down 0.04%.

Short-term outlook:
Strong nonfarm payrolls have reignited expectations for a US Fed rate hike in September, and a stronger US dollar and Treasury yields are exerting pressure. However, sulfur remains at high prices, providing cost support for hydrometallurgy. With mixed bullish and bearish factors, SHFE nickel is caught in a bind. In the short term, the most-traded SHFE nickel contract is expected to trade in a range of 126,000-131,000 yuan/mt.