SMM Nickel Market Morning Comment (Aug 12)

Last week, nickel prices saw a significant rebound on Friday. By the close on Friday, the most-traded SHFE nickel contract recorded 130,900 yuan/mt. Last week, nickel prices were mainly affected by macro sentiment, with fundamentals somewhat limiting the price increase. On the macro side, the early-week decline in nickel prices was influenced by the US July unemployment rate and non-farm payrolls data. The data showed an unemployment rate of 4.3% and an increase of 114,000 in non-farm payrolls, sparking market concerns about a recession and causing a sharp drop in overall market prices. However, by Thursday, data from the US Department of Labor indicated that initial jobless claims for the week were 233,000, lower than the expected 240,000 and the previous value of 249,000. This data suggested an improvement in the job market, alleviating recession fears and driving a rebound in commodity and the US dollar index. Fundamentally, SMM data showed that national refined nickel production in July was about 28,900 mt, up 8.2% WoW and 33.87% YoY. Both domestic and overseas inventories accumulated. The domestic market saw inventory increases due to rising stocks and the arrival of overseas nickel plates; overseas inventory grew mainly as domestic and Indonesian electro-deposited nickel entered LME Asian warehouses as futures inventory. Inventory pressure limited the upward space for nickel prices. Demand side, spot market transactions were sluggish last week, mainly because downstream customers had overstocked during the previous nickel price decline, with some extreme cases stocking up until September, thus preemptively exhausting Q3 demand. Therefore, nickel prices had limited support from the demand side. Overall, nickel prices are expected to fluctuate upward this week under the influence of macro sentiment, but supply pressure from fundamentals will limit the upward space for nickel prices.