SHANGHAI, Jul 2 (SMM) – Prices of Shanghai nickel may moderate, and hover rangebound in July after they rallied last month, but fundamentals are expected to underpin prices in light of domestic stock depletion of stainless steel and limited signs of a supply glut in the NPI market.

SMM learned that stainless steel producers are expected to maintain regular operation in July as margins improve. 

As of Tuesday July 2, the most-active SHFE nickel August contract fell more than expected for the second consecutive trading day, by 3.48%, to end at 97,510 yuan/mt, compared with a high of 102,360 yuan/mt on Friday June 28. Long positions taking profits from recent gains accounted for the declines. 

Lower futures prices failed to significantly buoy spot trades of nickel. This, together with the stable release of NPI capacity and a slow season in the upcoming months, will grow pressure on prices in the long run. 

Last month, Shanghai nickel prices were driven by upbeat macroeconomic development as well as supply worries on Indonesia floods. 

Market sentiment also received a boost from the suspension at Glencore's Koniambo nickel plant on June 24, which rallied prices last week. Though it remains unclear when the mill will resume, SMM expects a recovery in a few months.

Some 3.7%, or 876 mt in Ni content of domestic imports of ferronickel, including NPI, originated from the Koniambo nickel plant in May, SMM calculated based on customs data.