SMM Nickel Market Morning Comment (Sep 9)

Last week, nickel prices significantly declined, with the most-traded contract closing at 123,920 yuan/mt on Friday. Last week, macro sentiment weakening its support and fundamentals being pressured by increasing inventories pushed nickel prices into a downward trend. From an information perspective, new updates from Indonesia suggested that the market was currently very close to expecting new RKAB quota approvals, and there was strong anticipation for a gradual decline in nickel ore premiums. Meanwhile, the Indonesian government also mentioned last week that they expected LME nickel prices in the short to medium term to be maintained at $15,000-$16,000/mt. They convened relevant parties in the nickel industry to discuss solutions for ore supply and considered adjusting the current tax-free period policies for nickel projects. Macro-wise, the US August ISM services index was 51.5, slightly above the expected 51.4, with the previous value of 51.4. New orders index grew rapidly, but the employment index remained stagnant. Additionally, the US August ADP non-farm payrolls data released last Thursday showed an unexpected drop to 99,000, the lowest in three and a half years, with July data revised downward, indicating a sharp slowdown in the labour market. This caused the dollar and US debt to fluctuate downward, and it was evident that the market was betting on the US Fed accelerating its rate cut pace. Fundamentally, this year's nickel prices have been significantly influenced by Indonesian ore. Although the Indonesian ore situation remains unclear, market expectations are relatively optimistic, and cost side support may weaken in the future. In H2, the pace of new electro-deposited nickel projects has accelerated globally, leading to a significant accumulation of global refined nickel inventories. Last week, LME inventories exceeded 120,000 mt, and domestic social inventories increased by nearly 1,000 mt. This indicated that the demand side remained weak in the face of substantial refined nickel supply. In conclusion, nickel prices are expected to fluctuate downward in the short term due to fundamental pressure. However, we must remain vigilant of macro sentiment resurgence and pay attention to the night-time non-farm payrolls data updates.