SHFE Nickel Fell by 7.64% amid Supply Surplus and Weak Demand

SHANGHAI, June 24 (SMM) - On June 8, SHFE nickel rose to the highest point of 226,500 yuan/mt since May 5 while on June 9, SHFE nickel started to fall due to the Fed raising interest rates, hitting the lowest of 175,160 yuan/mt since Feb 15. As of 11:26, SHFE nickel fell by more than 7%. And according to the Fed Chairman Powell's speech in the Senate Banking Committee on the evening of June 22, the tightening monetary policy may still continue in the future, which may have a negative impact on the non-ferrous metals. 

In the spot market, SMM1# refined nickel spot prices declined for three days and fell by 2.94% to 188,000 yuan/mt from June 23. Jinchuan nickel were quoted at 10,000-11,000 yuan/mt, with an average price of yuan 10,500/mt, up 3,250 yuan/mt from yesterday. NORNICKEL nickel was offered at 5,500-5,500 yuan/mt, and the average price was 5,500 yuan/mt, flat from yesterday. The sharp correction in the spot absolute price of nickel plate today was mainly due to the continuous decline of the futures amid the poor macro sentiment and the arrival of overseas pure nickel.

In terms of fundamentals, on the supply side, affected by the production resumption of refined nickel, domestic pure nickel production increased slightly, and overseas pure nickel spot imports continued to maintain profitability. Therefore, the supply of pure nickel improved significantly compared with February-March. Secondly, the production lines of NPI and intermediate products in Indonesia will continue to be put into production, which may suppress the demand for pure nickel in the future.

On the demand side, although the pandemic situation in Wuxi and Foshan eased and the spot transaction of stainless steel improved, the low use ratio of stainless steel and pure nickel limited the stimulation to nickel prices. In terms of alloys, electroplating and batteries, affected by the sharp correction in the future prices last week, the demand for alloy purchases increased. Although the futures prices were still at a low level this week, due to the procurement cycle and other issues, the recent spot market transactions were generally poor.

To sum up, although the demand pure nickel was still weak while the supply is expected to be loose. Therefore, in the long term, it is more likely that nickel prices will continue to decline.