Macro Headwinds Drive SHFE Nickel Below 140,000 yuan/mt Threshold

This week, nickel prices exhibited an accelerating decline, with macro bearish factors serving as the core driver for the pullback in prices. At the start of the week, the most-traded SHFE nickel contract held above 144,000 yuan/mt in volatile trading. However, as US economic data continued to beat expectations, market expectations for a US Fed rate hike this year heated up, the US dollar index rebounded, and the nonferrous metals sector generally came under pressure. During the week, the most-traded SHFE nickel contract successively broke through several round number levels, including 142,000, 140,000, and 139,000 yuan/mt, hitting a low of approximately 137,700 yuan/mt. Its weekly cumulative decline exceeded 3%, while LME nickel simultaneously fell below the $18,500/mt mark. In the spot market, the average price of SMM #1 refined nickel this week was 142,090 yuan/mt, down 5,250 yuan/mt WoW. The Jinchuan nickel premium rebounded slightly to 800 yuan/mt this week, while the premium range for mainstream domestic electrodeposited nickel remained at -600 to 300 yuan/mt.

On the macro front, US economic data continued to beat expectations, and rate hike bets intensified. The US manufacturing PMI for May came in at 54, up 1.3% from April. On the geopolitical front, Trump stated he has no intention of restarting a full-scale war with Iran. Expectations for US-Iran negotiations have warmed up, and the market is betting on the resumption of shipping through the Strait of Hormuz, which could ease the sulfur transportation bottleneck. However, the US-Iran talks still face the risk of further twists and turns.

On the inventory front, inventory in the Shanghai Bonded Zone this week stood at approximately 1,700 mt, flat WoW. China’s social inventory was around 120,000 mt, with an inventory buildup of about 3,500 mt WoW.

Currently, the nickel market is locked in a tug-of-war between macro headwinds and cost support. In the short term, it is expected to remain in the doldrums. However, with policy and cost floors in place, downside room for a further sharp decline is limited. The most-traded SHFE nickel contract is expected to trade mainly within the range of 137,000–145,000 yuan/mt next week.