[SMM Nickel Weekly Review] Nickel prices rebounded slightly this week, with domestic inventory falling below the 40,000 mt level

This week, nickel prices showed a slight upward trend. In the spot market, the average price of SMM1# refined nickel rose from 122,850 yuan/mt at the beginning of the week to 123,400 yuan/mt, marking a 0.4% increase. The premium for Jinchuan nickel remained within the range of 2,300-2,600 yuan/mt this week, with relatively small changes. Affected by the stable fluctuations in nickel futures prices and weak downstream demand, trading in the spot refined nickel market was sluggish this week. In the futures market, the most-traded SHFE nickel contract (NI2507) closed at 122,200 yuan/mt, up 0.93%. LME nickel prices outperformed the domestic futures market, closing at $15,495/mt this week, up 1.24%.

On the macro front, the US ADP employment figure for May increased by 37,000, the lowest level since March 2023 and far below the expected 114,000. The previous figure was 62,000. This number was 5 standard deviations away from the expected value, representing the largest miss since August 2022. Following the data release, investors' expectations for future interest rate cuts rose sharply. Domestically, to maintain ample liquidity in the banking system, the People's Bank of China (PBOC) will conduct 1,000 billion yuan of outright reverse repo operations this week through fixed-quantity, rate-based tenders with multiple price awards, with a term of 3 months (91 days).

In terms of inventory, the inventory in the Shanghai Bonded Zone was approximately 5,000 mt this week, unchanged WoW.

Domestic social inventory stood at around 39,400 mt, experiencing destocking of approximately 2,178 mt WoW. Domestic inventory fell below the 40,000 mt level, alleviating inventory pressure.

This week, nickel prices stabilized amid fluctuations, with cost support and policy expectations providing underlying resilience. However, inventory pressure stemming from the surplus in the fundamental market still constrained upside room. A breakthrough in the market outlook will depend on clarity in Indonesia's nickel ore policies or unexpected supply-side contractions. In the short term, the lower bound of fluctuations is seen at 115,000 mt, while the upper bound faces pressure at 123,000 mt.