SMM Nickel Market Morning Comment (Jul 1)

Last week, SHFE nickel prices rebounded slightly, closing at 135,480 yuan/mt on Friday. The logic behind nickel prices has not changed significantly, and attention should continue to be paid to the impact from both the macro and fundamental perspectives. The rise in nickel prices last week can be attributed to two main factors: first, the end-of-month fund operations and the news of SHFE lowering nickel trading fees boosted market trading enthusiasm; second, the domestic supply pressure temporarily eased due to the increasing exports. Therefore, nickel prices showed strong resilience. From the macro perspective, Bowman, a member of the Board of Governors of the Federal Reserve System, stated that if the inflation rate approaches 2%, a rate cut might be considered, but if inflation does not ease, another interest rate hike is still possible. The US initial jobless claims for the week ending June 22 reached 233,000, lower than the previous and expected values, reflecting a relatively stable US job market. The risk of rising inflation remains, weakening market expectations for a moderate decline in inflation within the year and dampening expectations for a rate cut. From the fundamental perspective, the supply of domestic brands in the spot market remained limited. Driven by previous macro factors and the Indonesian RKAB approval, together with the continuous rise in the USD/CNY exchange rate, overseas nickel prices have consistently been higher than domestic prices, prompting domestic refined nickel producers to export large quantities of nickel plates. Meanwhile, overseas nickel barely entered the domestic market, leading to a continuous decrease in the circulation of nickel plates in the domestic market. Additionally, on Friday, SHFE announced a reduction in the trading fee for the NI2409 contract from 6 yuan/lot to 3 yuan/lot, further increasing market trading activity. In summary, despite the long-term expectation of oversupply, SHFE nickel prices have limited downward room in the short term, supported by improving SHFE/LME nickel price ratio and the fact that macro environment has not shifted obviously. It is expected that the most-traded SHFE nickel contract will be 130,000-140,000 yuan/mt this week.