SMM Nickel Market Morning Comment (Jun 3)

Last week, SHFE nickel prices showed a downward trend, with a significant drop last Thursday. They hit the lowest at 148,820 yuan/mt last week and slightly rose to 151,650 yuan/mt by Friday, down 0.74% WoW. Recently, while supported by strong macro sentiment, nickel prices were affected by the fundamentals of weakening refined nickel demand. High nickel prices continued to affect downstream purchasing sentiment, leading to a continuous buildup in nickel plate inventory, which increased the bearish pressure on nickel prices. On the macro front, the European Central Bank signaled a rate cut last week. The current slowdown in the inflation rate in the Eurozone provided room for the ECB to cut rates. According to Reuters, the ECB is expected to announce a rate cut at its monetary policy meeting on June 6. However, the market remained somewhat concerned, with some institutions still viewing inflation as the biggest risk to the Eurozone economy, followed by the impact of the US presidential election and geopolitical tensions. In the US, initial jobless claims rose to 219,000 in the week ending May 25, a slight increase compared to the expected and previous values, but still at a low level. The underlying strength of the job market continued to show signs of sustained robustness, which is expected to support the US economy. The fundamentals of refined nickel were affected by high nickel prices, leading to poor transaction atmosphere in the spot market. Specifically, electroplating and alloy, as traditional downstream sectors of nickel plates, saw an increase in demand for nickel plates last week amid the downward trend in nickel prices starting last Thursday, with nickel prices returning to around 150,000 yuan/mt. The decline in raw material prices led to a slow but steady recovery in demand from end-users. It is worthy of attention that NPI prices rose last week, due to the tight spot circulation supply and concentrated downstream demand. In summary, although current nickel prices showed a significant pullback last week amid bearish fundamentals, a deep decline in nickel prices seems unlikely in the absence of a shift to pessimistic macro sentiment. Nickel prices are expected to range between 145,000-150,000 yuan/mt this week.