SMM Nickel Market Morning Comment (Aug 19)

Last week, nickel prices narrowly fluctuated near the cost support level, mainly influenced by macro sentiment and fundamentals. On the macro side, factors such as the US GDP data exceeding expectations and Japan's interest rate hike cooled market sentiment. However, low-profit and undervalued varieties saw marginal recovery after continuous declines. Last week, the US July CPI data showed a YoY increase of 2.9%, marking the fourth consecutive month of decline and the first time since March 2021 that it returned to the 2% range. The actual CPI and core CPI indices were slightly below expectations, further lowering the overall annual CPI rate from the expected 3.0% to 2.9%. Additionally, the initial jobless claims for the week ending August 10 in the US were 227,000, lower than expected and previous values, indicating a still strong job market. This provided positive signals for continued US economic growth and international economic recovery, raising expectations for a soft landing of the US economy in September, which could benefit commodity prices. From a fundamental perspective, due to the decline in nickel prices at the beginning of the month, the price difference between the domestic and overseas markets narrowed, leading to a sharp reduction in domestic nickel plate exports and more nickel plates circulating in the domestic market, resulting in increased domestic inventories. Despite this, overseas inventories continued to rise, mainly because deliverable electro-deposited nickel from Indonesia was registered as warrants in LME Asian warehouses, increasing futures inventories and putting pressure on nickel prices. On the demand side, the overall spot market transactions in August were relatively flat, mainly because downstream customers overstocked in advance during the nickel price decline, with some even stocking up for September, thereby preemptively consuming part of the Q3 demand for nickel plates. In summary, it is expected that the impact of supply surplus expectations on nickel prices in August will be weak. However, due to the intertwined effects of costs and macro news, the downside space is limited, and overall, prices will continue to fluctuate within a range.