Nickel Prices Stopped Dropping Last Week on Fundamentals Support

SHANGHAI, May 22 (SMM) - The market paid close attention to the pending US Fed rate increases and the possible global economic recession as the Fed rate hike in the past few months failed to quell the core inflation. On the evening of May 18, many US Fed officials released hawkish remarks, thus the market was betting on 40% odds of rate hike in June. The US Treasury yields rose as a result, and so did the US dollar index. The nickel futures prices, however, rallied from lows on May 19 regardless of the macro pressure. On the fundamentals, the downturn in futures prices in the past few weeks has led to a low absolute spot price, which, coupled with the downstream companies’ rigid-demand purchases, slightly boosted the spot trades. However, the spot supply decreased, which was caused by the following three reasons. First, the domestic electrowinning nickel capacity has not yet been fully put into production. Second, the import volume declined sharply as some overseas producers cut their output. Third, the number of long-term orders signed by traders fell significantly compared with previous years. SMM presumes that the supply tightness will not be eased until late May or early June when some long-term contracts will be delivered. On the demand side, pure nickel consumption by the alloy sector added 7.25% month-on-month in April, and the figure is expected to be higher in May amid the crashing nickel prices. Besides, nickel briquette demand from the stainless steel mills will also grow with the expected rise in 300-series stainless steel production. Therefore, nickel prices may increase. However, in a statement made on May 19, G7 indicated that it would continue its efforts to reduce Russia's income from metal trades, which may hurt nickel prices.