SHFE Nickel Price Slump 11.2% in Jan with Frequent Events on Macro and News Front

SHANGHAI, Jan 11 (SMM) - SHFE nickel price rose nearly 16% throughout December. Specifically, the market was frequently disturbed by the news front in early December. The Nova nickel ore producer in Western Australia suspended the production for about four weeks. On the morning of December 7, the market reported that Indonesia was considering resuming nickel ore exports and taxation. The conflict between Ukraine and Russia has not yet ended. On the evening of December 7, the European Union announced the ninth round of sanctions against Russia, which targeted Russia's energy, mining and other fields. As such, SHFE nickel rose to 220,000 yuan/mt. Although nickel price fell in the middle of the month, SHFE nickel went up again in late December following the sound US economic readings and the expected slowdown in the Fed’s interest rate hike as well as the news that Norilsk is considering reducing nickel production by about 10% in 2023. SHFE nickel kicked off the downward track entering January, and dropped 11.2% as of January 10. On the macro front, Federal Reserve official Rudd delivered a speech and hinted that a final value of 5.1% at the end of this round of interest rate hikes may be sufficient to control inflation, which means that the rate will be raised by at least 75 basis points in the following few months. The speech also heralded the Fed's determination to control inflation in 2023. The market's worries about economic recession have thus intensified, which has a negative impact on commodity prices. On the news front, Tsingshan’s first electrodeposited nickel product has come off the product line with production undertaken by a new energy manufacturer in Hubei. The designed capacity of the project is 1,500 mt per month, with output expected starting from this January. The original momentum of SHFE nickel was rendered by insufficient supply of deliverable nickel and lack of confidence among the shorts. However, the commissioning of Tsingshan’s refined nickel project has weighed on SHFE nickel recently. From the second half of 2022 to the beginning of 2023, with the continuous commissioning of Huayou and Tsingshan's new refining capacity, the market's concerns about the shortage of refined nickel products have been alleviated.  And considering that Jutai, Huayou and Tsingshan still have new refined nickel production lines under construction with a combined capacity of 78,000 m, the pure nickel supply will expand further in the long run. Rising visible pure nickel inventory across the globe will be bearish for SHFE nickel price.