Outlook for Nickel Prices amid Weak Expectation of Interest Rate Hikes and Poor Demand

SHANGHAI, Jul 5 (SMM) - In the spot market, the average price of SMM #1 refined nickel rose significantly by 2.98% to 186,900 yuan/mt.

On July 4, spot premiums of Jinchuan nickel were 15,000-17,500 yuan/mt, with the average price standing at 16,250 yuan/mt, up by 7,200 yuan/mt from the previous trading day. Premiums of NORNICKEL nickel stood at 12,000-12,500 yuan/mt. The average price was 12,250 yuan/mt, an increase of 6,750 yuan/mt from the previous trading day. On July 3, fluctuations in Jinchuan and NORNICKEL nickel spot prices were small. Besides, the Jinchuan nickel supply in the Shanghai market was scarce as the traders mainly held a wait-and-see sentiment. The prices of nickel briquettes were 175,000-176,500 yuan/mt, up by 300 yuan/mt from the previous trading day. The nickel briquettes trading was poor as the futures prices rebounded and the cost efficiency of nickel briquettes was lower. Besides, at present, the mainstream raw material of alloy is still nickel plate, further leading to the poor nickel briquettes trading.
According to SMM analysis, recently, the inflation in the US has gradually stabilised, and the market’s expectation of a sustained interest rate hike in the future has weakened, which is beneficial to nickel prices to a certain extent.

On the supply side, affected by the fluctuations in nickel prices, traders generally held a wait-and-see attitude, and the delivery of Jinchuan nickel was less than expected, so the Jinchuan nickel supply in Shanghai was scarce. In terms of NPI, the transaction prices kept declining due to traders' and the NPI plants’ dumping of goods.

As for the costs, according to the current transaction price, the NPI plants suffered losses, and the supply remained surplus. In terms of nickel sulphate, the inquiry of downstream precursor factories was active, but the supply of nickel sulphate small orders was insufficient, and the sources of small orders in the market were less.

On the demand side, according to SMM research, the pandemic situation in Wuxi over the weekend seriously affected the normal trading of the market. Typhoon Chaba cast a limited impact on the Foshan market, and the traffic returned to normal. In terms of alloys, downstream manufacturers generally held a bearish attitude towards nickel prices. Besides, except for the military industry, the order volume of the alloy was small this year, and the overall demand was weak.

To sum up, the current demand for pure nickel remains poor even though the downstream purchases on rigid demand, while the supply of primary nickel is expected to be sufficient. Therefore, in the long run, nickel prices will remain rangebound.