SMM Nickel Market Morning Comment (Jun 17)

Last week, SHFE nickel prices continued to decline, dropping by 4.03% WoW. Over the past two weeks, nickel prices have significantly fallen, declining from 150,000 yuan/mt to 140,000 yuan/mt and further down to the range of 130,000 yuan/mt, with the lowest at 136,130 yuan/mt last week. The decline was mainly affected by the weakening macro support for metal prices, leading to a general pullback in non-ferrous metal prices and a gradual withdrawal of long funds from the futures market. On the macro front, data released by the US Bureau of Labor Statistics on Wednesday, June 12, showed that the US May CPI grew by 3.3% YoY, slightly lower than the previous value and expectations (3.4%), and core CPI grew by 3.4% YoY, lower than expectations (3.5%) and the previous value (3.6%), marking the lowest level in three years. May PPI fell by 0.2% MoM synchronously with CPI, indicating that US inflation pressure is easing, with a growth of 2.2% YoY, flat from April. Core PPI was flat MoM, lower than the expected 0.3% growth. Commodity prices dropped significantly by 0.8%, the largest decline since October 2023, with energy prices falling by 4.8% and food prices dropping by 0.1%. Although market expectations for a US Fed rate cut have risen, some opinions suggest that the Fed may slow down the rate cut process to avoid adverse effects on inflation control. Fundamentally, spot prices of various brands continued to rise, with premiums for domestic electro-deposited nickel from Huayou and CNGR increasing. However, in transactions, the midpoint of premiums and discounts for electro-deposited nickel remained at zero as trades were scarce with excessively high quotes. Supply side, although nickel production in May and June is expected to be normal or slightly increase, domestic nickel producers preferred exports for higher profits with the significant price gap between domestic and international markets, resulting in tight domestic supply of nickel plates. Some companies almost did not trade domestically, with most of their production exported, exacerbating the scarcity of domestic spot supply. Demand side, alloy consumption in June is expected to grow steadily, continuing to support refined nickel demand. However, the scheduled production of steel mills for June slightly decreased, reducing nickel demand. Though less affected by raw material prices, the electroplating industry, entering the traditional summer off-season, saw an overall decline in demand. Additionally, nickel briquettes were in short supply in the domestic spot market due to the continued closure of import window. With the expectations for a decline in nickel sulphate prices, the downstream raw material structure will change. Therefore, nickel prices are expected to range between 135,000-145,000 yuan/mt this week.