SMM Nickel Market Morning Comment (Jul 29)

Last week, SHFE nickel continued its downward trend, down approximately 2.67% WoW. By the close on Friday, SHFE nickel recorded 126,700 yuan/mt. Last week, nickel prices were influenced by both fundamentals and macro factors, experiencing wide fluctuations. Macro side, in Q2 2024, the US real GDP grew at a 2.8% annualized pace, higher than the expected 2.0% and significantly rebounding from 1.4% in Q1. This indicates a strong recovery in the US economy in Q2. Alongside economic growth, inflationary pressures eased. The PCE price index grew by 2.6% in Q2, lower than 3.4% in Q1. The core PCE price index, which excludes food and energy prices and is the US Fed's most important inflation measure, grew by 2.9%, also lower than the previous value of 3.7%. Multiple data indicate the market expectation for the US Fed to make its first rate cut in September has increased. It is necessary to continuously monitor the US Fed's actions and the upcoming FOMC meeting next Wednesday. Fundamentally, last week saw a hot trading atmosphere in the spot market, with downstream concentrated procurement occurring as prices fell to yearly lows. However, it is important to note that this was merely essential restocking due to downstream conservative purchasing at high nickel prices earlier, rather than a genuine recovery in end-user demand. Therefore, as nickel prices entered a downward channel, end-user demand did not significantly increase. Spot market transactions may change in the future. In summary, the macro side has not yet provided a clear direction, but positive sentiment has emerged. However, the supply-demand mismatch persisted, with high downstream short-term procurement sentiment but significantly shrinking orders.