[SMM Analysis] Macro sentiment drives nickel prices to continue rebounding, while spot market transactions remain flat

The most-traded SHFE nickel contract (NI2508) hit a low of 120,020 yuan/mt at the beginning of the week and closed at 122,320 yuan/mt on Friday, with a weekly gain of 1.4% or an increase of 1,690 yuan/mt WoW. LME nickel closed at $15,400/mt, up 1.3% WoW. In the spot market, the average price of SMM 1# refined nickel was reported at 122,350 yuan/mt, up 1,100 yuan/mt WoW. The premium of Jinchuan nickel remained stable at 2,000-2,700 yuan/mt, but fluctuated significantly mid-week, with the average premium decreasing by 500 yuan/mt WoW. The premium range of mainstream electrodeposited nickel in China remained at -200-300 yuan/mt this week, a decrease from last week. Although futures prices have rebounded somewhat, the downstream sector is currently in the off-season for consumption, with low purchase willingness and weak spot transactions. The nickel fundamentals remain unchanged, and it is expected that the rebound space for nickel prices in the future will be limited, with prices continuing to come under pressure, ranging from 118,000 to 124,000 yuan/mt.

From a macro perspective, this week, the country held the sixth meeting of the Central Financial and Economic Affairs Commission to study issues such as advancing the construction of a unified national market and promoting high-quality development of the marine economy. The meeting emphasized regulating enterprises' low-price and disorderly competition in accordance with laws and regulations, guiding enterprises to improve product quality, and promoting the orderly exit of backward capacity. Affected by the "anti-cut-throat competition" sentiment and policy disturbances in Indonesia, commodities have embarked on a rebound wave, with nickel prices following suit. Meanwhile, the period for nickel ore quota permits in Indonesia has been shortened from three years to one year, and policy disturbances in Indonesia have also supported the rebound of nickel prices to a certain extent. The US added 147,000 seasonally adjusted nonfarm payrolls in June, better than expected, with the unemployment rate unexpectedly falling to 4.1%. Traders are no longer betting on a US Fed interest rate cut in July, and the probability of a cut in September has decreased.

In terms of inventory, the inventory in the Shanghai Bonded Zone was approximately 4,700 mt this week, with a destocking of about 300 mt WoW.

Domestic social inventory was approximately 38,000 mt, with an inventory buildup of 186 mt WoW. Inventory levels increased slightly.