SMM Nickel Market Morning Comment (Mar 4)

Nickel prices continued to rise last week because the approval of nickel ore mining quotas in Indonesia under RKAB was slower than anticipated. According to SMM research, as of February 26, 2024, Indonesia had approved a quota of 145 million wmt of nickel ore for 2024, accounting for 60% of the demand. It is expected that the process will accelerate in the future, but concerns over supply of nickel ore persist. US core inflation increased 2.8% on a year-on-year basis in January, the smallest advance since March 2021, after rising 2.9% in December. However, the month-on-month growth of PCE data hit a new high, and recent data indicates rising costs of goods and services, which could potentially reignite the inflation trend. It's crucial to closely monitor the February data to verify the inflation rate. Additionally, U.S. initial jobless claims in the week ending Feb 29 rose to 215,000, surpassing both the previous figure and market expectations. From a fundamental perspective, the spot market witnessed subdued trading activity. Due to the impact of high nickel prices, even as the regular replenishment period comes, downstream purchasing willingness remains relatively low. Some downstream plants opted to use the raw material inventory on hand. Upstream smelters were keen on shipping out products, while traders kept reducing premiums to boost sales. Smelters, which slowed down over the Chinese New Year holiday, will gradually increase output in March. Demand for nickel plates decreased in various sectors because downstream plants were not willing to accept the current low nickel prices. In summary, the nickel market fundamentals now looks bearish, but the overall macro outlook is leaning bullish. Nickel prices are expected to trend slightly stronger this week, with the 2404 nickel contract moving between130,000-140,000 yuan/mt.