SHANGHAI, Aug 3 (SMM) –
since July, the overall trend of SHFE nickel has been fluctuating upwards, which was mainly caused by market expectations that the Federal Reserve's interest rate hike will come to an end and the US dollar will fall and by better-than-expected US data alleviating market concerns about the global economic recession and macroeconomic factors such as the issuance of favorable policies in China. On July 26, the most-traded SHFE nickel contract hit a new high of 174,220 yuan/mt since June 16, 2023, with a monthly increase of 9.62% as of July 31.
The trend of LME nickel was similar to SHFE nickel, reaching a new high of $22,580/mt since June 19, 2023 on July 25, with a monthly increase of 7.70% as of CST 17:21 on July 31.
Spot price
The average price of SMM1 # spot refined nickel in July showed an upward trend. The price was at 174,800 yuan/mt on July 31, an increase of nearly 6% compared to June 30.
Fundamentals analysis
Supply side: in terms of production, the domestic refined nickel production in June totalled 20,400 mt, increasing 9.39% month on month and 31.06% year on year. The continued climb in June was basically in line with expectations.
It is expected that the domestic refined nickel production in July will reach 21,300 mt, an increase of 4.27% month on month and 32.81% year on year, reaching a new historical high. Refined nickel production continued to increase in July, which was possibly caused by the resumption of production at a smelter in north-west China that had previously stopped production due to maintenance, but it still takes time for it to fully reach production. In addition, it is expected that the production of some electrowinning nickel production lines in South China will still be climbing during July.
In terms of imports, refined nickel imports have been in losses since mid-April 2023, which was mainly due to the fact that the price of LME nickel has been consistently higher than that of SHFE nickel. Yet, with the rising of SHFE nickel price, import losses have narrowed to approximately 6,300 yuan/mt as of July 28.
It is expected that import losses will continue in August.
Inventory: currently, the pure nickel stocks in different regions of China are still at a relatively low level. In July, the inventory showed a fluctuating trend, accumulating 770 mt in the last week of July. This was mainly caused by the arrival of overseas nickel at the end of the month, and the weak purchasing willingness of downstream enterprises due to the high price of SHFE nickel, , thus causing an oversupply. The total inventory on July 28 was approximately 5,300 mt, an increase of approximately 20 mt compared to June 30.
Demand side: the demand of pure nickel in the alloy sector increased steadily in July, but orders for civilian alloys have weakened compared to June. The 300 series stainless steel mills continued to maintain high production in July, providing some support for pure nickel demand, but orders for 300 series stainless steel declined at the end of July. It is expected that demand will weaken in August compared to July.
SMM Outlook
At present, there are expectations for ample supply. The current pattern is still oversupply due to the total production of refined nickel in various regions in China that hit a new historical high in July and the continuous arrival of overseas nickel plates. Fundamentally, strong supply and weak demand may weigh on nickel prices. In view of the impact of macro factors on nickel prices, SMM believes that nickel prices may be volatile in the short term.
