The macro outlook remains uncertain, nickel prices fluctuate rangebound [Institutional Commentary]

On Monday, nickel prices fluctuated and rebounded. The most-traded SHFE nickel contract closed at 123,650 yuan/mt, up 0.76% from the previous day, while the most-traded LME nickel contract closed at $15,370/mt, up 2.33% from the previous day. Macro-wise, with unclear tariff prospects, the two-year US Treasury yield plunged more than 10 basis points intraday after the US Fed released inflation expectations. The US dollar index fell below 100 for two consecutive days, approaching a three-year low. From the fundamental perspective of nickel itself, the supply-demand imbalance remains unchanged. Recently, as the nickel pig iron (NPI) price rise cycle ended, downstream users' psychological price level for nickel also declined. Yesterday, as nickel prices continued to rebound, spot transactions cooled significantly. Cost side, the Sulawesi mining area is still in the rainy season, and nickel ore supply remains tight. Meanwhile, the premium of refined nickel over NPI is at a low level, and Indonesian RKEF production lines lack motivation to switch to high-grade nickel matte production, keeping high-grade nickel matte supply tight. With relatively low MHP inventory in the market, intermediate product prices remain firm overall, providing solid cost support for nickel prices. In summary, the short-term macro outlook remains unclear. At current nickel price levels, although there is some room for slight valuation repair, we believe the cost-effectiveness of chasing the rally is no longer high. Operationally, we recommend adopting a wait-and-see approach or mainly selling on rallies. Today, the most-traded SHFE nickel contract is expected to trade in the range of 115,000-128,000 yuan/mt, while the LME nickel 3M contract is expected to trade in the range of $14,000-15,800/mt.