SHFE nickel prices bottomed out, but fundamentals remained poor

Nickel prices bounced back due to positive macro sentiment last week, pushing them above 130,000 yuan/mt. The highest price once reached 135,450 yuan/mt. On the macro side, the US ADP National Employment report showed private payrolls increased by 103,000 jobs in November, below market expectation of 130,000. Additionally, on the evening of December 7, the US weekly initial jobless claims were reported. The figure rose slightly to 220,000, which was slightly below the expected 222,000 but higher than the previous week's 219,000. The data reflects a surprising decline in the US job market. This has increased speculation in the market about a December interest rate cut by the Federal Reserve. Such a move could have a positive impact on commodities and the non-ferrous sector. In terms of fundamentals, based on SMM research, pure nickel production in November decreased by 3.9% compared to the previous month. The decline in production is primarily attributed to the downward trend in nickel prices since October, which first squeezed the profits of enterprises producing electrodeposited nickel from externally sourced raw materials. In November, with nickel prices accelerating downward, some enterprises slightly reduced production due to cost pressures. However, this production reduction cannot reverse the current situation of oversupply in pure nickel. According to SMM research, pure nickel social inventory accumulated by 1,180 mt last week. The recent spot market activity has shown some improvement. In terms of demand, the stainless steel sector has witnessed an increase in overall monthly production due to major factories concluding maintenance, which provides some support to pure nickel demand. However, in the alloy sector, due to pre-holiday inventory clearance combined with the traditional off-season in the industry, there has been a slight decrease in pure nickel demand from alloy sector. Overall, the current demand for pure nickel remains weaker compared to the supply side. Taking all these factors into account, the current macro situation seems favorable, but the fundamentals support for nickel prices appears limited.