SMM nickel, September 8:
Macro and market news:
(1) Oil prices hit a six-week high as Middle East supply risks intensify. Saudi Aramco oil facilities were attacked on Monday, compounded by weekend mutual attacks on tankers between the US and Iran and Iran's warning that it would establish a "restricted zone" outside the Strait of Hormuz. WTI settled up 1.33% at $92.70/bbl, and Brent rose 1.37% to $95.79/bbl. The OPEC+ meeting on Sunday kept October production policy unchanged. US stock and Treasury spot markets were closed for the Labor Day holiday.
(2) The yen surged to a seven-month high, and the US dollar fell below the 99 mark. The market is pricing in a 75% probability of a 25 bp rate hike by the Bank of Japan at its September 18 meeting, with USD/JPY down 1.22% to near the 154 level. The US dollar index settled down 0.26% at 98.91. Traders have fully priced in a 25 bp rate hike by the European Central Bank this Thursday to 2.50%.
(3) Focus this week: Friday's US August CPI will determine whether the US Fed hikes rates in September. The market is currently pricing in about a 60% probability of a hike, with Thursday's PPI as a precursor. UBS has recently shifted to expect the US Fed to hike rates by 25 bp each in September and December. In China, the central bank's gold reserves rose to 76.73 million ounces at the end of August, marking 22 consecutive months of increases.
Spot market:
On September 8, the average price of SMM #1 refined nickel was 127,850 yuan/mt, down 650 yuan/mt from the previous trading day. In terms of spot premiums, the average for Jinchuan #1 refined nickel was 1,750 yuan/mt, up 100 yuan/mt 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) opened lower and moved lower in early trading, closing the morning session at 127,180 yuan/mt, down 0.55%.
Short-term outlook:
Nickel prices remain driven primarily by high inventory and weak demand fundamentals, with cost support providing a floor. Market sentiment is cautious ahead of Friday's US August CPI release. In the short term, the most-traded SHFE nickel contract is expected to trade in the range of 126,000-130,000 yuan/mt.
