SMM Nickel Market Morning Comment (Jun 24)

Last week, SHFE nickel prices continued to decline, reaching a low of 132,810 yuan/mt. By the close on Friday, it slightly rebounded to 133,510 yuan/mt. The price drop was caused by the weakening macro support for non-ferrous metals, with all varieties gradually returning to fundamentals. Market expectations of a supply surplus led to weak prices. On the macro front, data released on the evening of June 20 showed that the US initial jobless claims for the week ending June 15 decreased by 5,000 to 238,000, higher than the expected 235,000. Meanwhile, the US continuing jobless claims were 1.828 million, exceeding the expected 1.81 million. Additionally, the US June Philadelphia Fed manufacturing index was 1.3, far below the expected 5 and the previous value of 4.5, reflecting the current instability in the US market. Fundamentally, the price logic of SHFE nickel has shifted from being macro-driven to fundamentals-driven. The most worthy of attention is the change in refined nickel inventory both domestically and overseas. SHFE nickel experienced stock reduction for four consecutive weeks, dropping from 37,903 mt at the beginning of June to 29,804 mt last week, a total decrease of 8,099 mt, down 3,314 mt WoW, marking the largest weekly destocking since 2023. In contrast, LME nickel inventory increased from 83,724 mt at the beginning of June to 90,450 mt, an increase of over 7,000 mt, reaching the highest level since February 2022. According to an SMM survey, driven by previous macro factors and the Indonesian RKAB approval, as well as the continuous rise in the exchange rate of the US dollar against the RMB, overseas nickel prices have consistently been higher than domestic nickel prices, leading to exports of numerous domestic nickel plates. At the same time, overseas nickel could not enter the domestic market, ultimately bringing a continuous decrease in domestic circulating supply of nickel plates. Demand side, although end-users did not see a significant increase in orders, downstream purchasing sentiment was relatively optimistic during the downward trend in nickel prices, given the insufficient raw material inventory caused by the high nickel prices in the previous period. Therefore, the demand for nickel plates increased significantly in June. In summary, despite the unchanged long-term expectation of oversupply, SHFE nickel prices have limited downward room amid improving SHFE/LME nickel price ratio and the lack of a significant macro shift. It is expected that the most-traded SHFE nickel contract will operate between 130,000-140,000 yuan/mt this week.