SMM Nickel Market Morning Comment (Jul 8)

Last week, SHFE nickel prices continued to rise slightly, closing at 138,090 yuan/mt on Friday evening. The logic behind nickel prices has not changed significantly, and attention still needs to be paid to the impact of both macro factors and fundamentals. The rise in nickel prices last week can be attributed to two main points: First, LME strengthened restrictions on the delivery of Russian nickel, announcing a suspension on acceptance of refined nickel products from Norilsk Nickel PJSC's Harjavalta plant in Finland starting October 3. Second, domestic supply pressure eased temporarily due to increased exports. On the macro front, the Minutes released by the US Fed on July 3 indicated that the weak CPI in May supported the view of slowing inflation, but it would be inappropriate to cut rates before more clearly confirming that inflation is steadily moving towards the 2% target. Although Fed officials suggested a wait-and-see approach, they also acknowledged the slowdown in the US economy and the easing of price pressures. The PMI, labour market data, and trade data released on the same day were all lower than expected, further validating the trend of economic cooling and sparking rate cut expectations, attracting bulls into the market. Fundamentally, domestic spot supply remained limited. Driven by previous macro factors and the Indonesian RKAB incident, as well as the continued rise in the exchange rate of the dollar against RMB, overseas nickel prices have consistently been higher than domestic prices, prompting domestic refined nickel producers to continue exporting nickel plates. In summary, although the long-term expectation of oversupply remains unchanged, SHFE nickel prices have limited downward room in the short term, supported by improving SHFE/LME nickel price ratio and the fact that macro environment has not shifted obviously. It is expected that the most-traded SHFE nickel contract will reach 135,000-145,000 yuan/mt this week.