Nickel Prices Hit Bottom Amid Shifting Macro Expectations and Policy Uncertainty

Nickel prices consolidated at lows and hit bottom this week. Early in the week, expectations for further US Fed interest rate hikes and a stronger US dollar weighed on the most-traded SHFE nickel contract, keeping it under pressure around 124,000 yuan/mt. Mid-week, US June non-farm payrolls data significantly missed expectations, triggering a sharp reversal in macro sentiment. Rate hike expectations cooled abruptly, the US dollar index pulled back quickly, and nickel prices rebounded slightly, leaving the weekly decline at 1.2%. The LME nickel 3M contract also traded under pressure this week, breaching the $17,000 level and falling nearly 2% WoW. In the spot market, SMM #1 refined nickel averaged 127,080 yuan/mt this week, down 4,500 yuan/mt WoW. Jinchuan nickel premiums trended higher this week, climbing to around 2,200 yuan/mt, while mainstream electrodeposited nickel discounts held steady in the 400-400 yuan/mt range. On spot transactions, the sustained drop in nickel prices encouraged bargain-hunting by end-users, but after some downstream players had already stockpiled during the earlier price decline, overall weekly trading activity was moderate.

On the macro front, US Labor Department data on July 3 showed that non-farm payrolls increased by only 57,000 in June, roughly half the 113,000 expected and well below the downwardly revised 129,000 for May. The sharper-than-expected cooling in non-farm payrolls data prompted a more cautious assessment of the employment outlook and led investors to re-evaluate the Fed’s monetary policy path. Rate hike expectations cooled markedly, the US dollar index fell to a two-week low, and the US Treasury yield curve steepened steadily.

Inventory side, bonded zone inventory in Shanghai stood at around 2,700 mt, flat WoW. China’s social inventory stood at approximately 130,000 mt, a WoW buildup of about 1,100 mt.

Nickel prices are currently caught between macro disruptions and weak industry fundamentals. In the short term, recovering macro sentiment supports a rebound, but the upside is still capped by high inventory pressure. The most-traded SHFE nickel contract is expected to trade in a core range of 125,000-135,000 yuan/mt next week.