Nickel prices dropped last week because of the waning optimism

Nickel prices dropped last week. By last Friday, SHFE nickel contract closed at 134,710 yuan/mt, down by 5.05% WoW. The decline was driven by waning optimism in the market, leading prices to align with fundamentals. Previously, bullish sentiment was fueled by Indonesia RKAB and supply-demand imbalances in the new energy sector. Firstly, nickel prices were greatly impacted by slow RKAB approval, which didn't meet market expectations. This led to a belief in scarce raw material supply, boosting prices across the nickel industry. However, recent research by SMM shows an acceleration in Indonesia RKAB approval, with 107 companies approved, totaling 152.6 million wmt capacity. This has shattered the expectation of scarce supply, causing market prices to drop. Secondly, the nickel sulphate spot transactions were weak. There's limited room for further increase in nickel salt prices. Supply side, more nickel is being produced both in China and abroad. In March, China's refined nickel production is expected to rise by 3% MoM. Also, Russian nickel might arrive by the end of the month increasing expectations of more pure nickel supply. Demand side, spot transactions picked up slightly as nickel prices fell, prompting some restocking in alloy and special steel sectors. Yet, downstream industries express pessimism about future demand, with some reporting a notable drop in orders YoY. In summary, with ample supply and low demand for pure nickel, SHFE nickel 2404 contract is anticipated to show weak performance this week.

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