SMM Nickel Market Morning Comment (Mar 18)

Nickel prices continued to rise due to increased costs. Strong performance from MHP and nickel sulphate boosted the external sourcing costs for nickel producers. Slower-than-expected Indonesia RKAB approval pushed nickel ore prices higher, sparking concerns of supply shortages once more. SMM estimates that it costs about 142,000 yuan/mt to produce refined nickel via buying nickel sulphate externally, while it cost nearly 146,000 yuan/mt via buying MHP and high-grade nickel matte. The nickel price increase is also driven by both overall market sentiment and fundamentals. Domestically, policies talked about in the Two Sessions, especially the news about the National Development and Reform Commission pushing for large-scale equipment upgrades, are directly benefiting the non-ferrous metal industry. Globally, the Fed officials hinted at possibly cutting rates three times this year, possibly starting in June. These cuts are good for commodities since they prompt investors to chase better returns in markets instead of leaving money in low-interest bank accounts. Fundamentally, the downstream pure nickel demand is weak. Traders and smelters are hesitant to buy at high nickel prices when raw material costs go up but demand stays low. Alloy plants are turning over their nickel inventory every two months. This means they might not use up their own stock until April because of the current prices. Considering all this, nickel prices are expected to stay high this week.