Nickel prices are expected to be volatile

Since last Tuesday night, nickel future prices have shown a strong trend, with the SHFE nickel closing last week up approximately 3.3%. On the macro front, the central bank has encouraged commercial banks to renegotiate mortgage contracts with borrowers to lower lending rate for existing mortgage book in China on July 14, easing pressure on household balance sheets. Additionally, last week, various regions in China have introduced policies to support the real estate sector. Furthermore, the US dollar index sharply declined last week, limiting the room for the Chinese yuan's depreciation. Offshore Chinese yuan hovered around 7.20 yuan against the US dollar. Regarding the fundamentals, the Norilsk nickel supply in the spot market has been relatively tight, resulting in a sustained strong premium for Norilsk nickel. Jinchuan nickel plates have also seen continuous high supply last week. On the demand side, in the stainless steel sector, overall production for July of the 300-series stainless steel has increased compared to June, and downstream demand from steel mills has shown some improvement, leading to positive sentiment. In the alloy sector, civil orders for some alloy enterprises have declined last week, but demand remained stable in the military and nuclear power sectors has provided some support to nickel consumption. To sum up, last week, nickel supply has been relatively weak while demand has shown a slight improvement. This week, nickel prices are expected to be influenced by the Chairman Powell's speech after the release of US Federal Reserve's interest rate decision in July. The focus is on whether the Fed will slow down rate hikes in the second half of the year. On the supply side, it is expected that pure nickel supply will be more optimistic this week due to the restart of a smelter at the end of the month and normal production of domestic electrowinning nickel projects. On the demand side, as the end of the month comes, downstream alloy enterprises will make necessary purchases for August orders, providing some support to pure nickel demand. In the electroplating sector, some plants may choose to shut down or reduce production due to the impact of high temperatures and weaker downstream orders. In conclusion, the current macro and fundamental factors are intertwined, and it is expected that there will be limited downward space for nickel prices this week.