SMM Nickel Market Morning Comment (Jun 11)

Last week, SHFE nickel prices continued to decline, dropping by 5.86% WoW. Nickel prices hit a low of 140,140 yuan/mt during the week and slightly rebounded to 142,770 yuan/mt on Friday. The decline in nickel prices was mainly due to weakened macro support for non-ferrous metals, with an overall downward trend. Prices of various metals returned to fundamentals, and many bulls retreated from the futures market. Specifically, SHFE nickel prices fell from the range of 150,000 yuan/mt to 140,000 yuan/mt; LME nickel prices dropped from the range of $20,000/mt to $18,000/mt, marking the largest decline among the non-ferrous metals sector. However, the spot market performed contrary to the futures market, with spot prices of various brands moving up. Domestic electro-deposited nickel brands like Huayou and Zhongwei saw quotations at a premium, mainly due to downstream demand being inhibited by high raw material prices for a long time, with some companies making no purchases in the past two months. Therefore, the price drop provided an opportunity for downstream companies to purchase and stock up, making the spot market transactions active. Supply side, although nickel production in May and June is expected to be normal with a slight increase, the large price spread between domestic and overseas markets has led many nickel producers to prefer exports to earn foreign exchange. Some nickel producers hardly traded domestically, with most of their production being exported, resulting in tight supply of domestic nickel plates. Additionally, some companies exhausted their production for export demand and downstream demand resumption, further leaving domestic spot cargoes scarce. On the macro side, the European Central Bank held a monetary policy meeting at its headquarters in Frankfurt, Germany last week, deciding to lower the three major key interest rates in the Eurozone by 25 basis points each. This is the first rate cut by the ECB since it stopped raising rates last October, and may guide the US Fed's decision on rate cuts. Although the US Fed currently maintains hawkish rhetoric, market expectations for no rate hikes have increased and those for rate cuts have returned. In summary, nickel prices currently rely on industry fundamentals, but caution is still needed on the overall impact of macro sentiment on non-ferrous metals. It is expected that nickel prices will fluctuate between 135,000-145,000 yuan/mt this week.