SMM

Last week, nickel prices generally showed upside potential. By the close of trading on Friday, the most-traded contract price had fallen to 131,510 yuan/mt, up 0.6% WoW. The recent trend in nickel prices has been mainly influenced by expectations of macro interest rate cuts. Reviewing August, at the beginning of the month, nickel prices fell due to pressure from recession concerns triggered by disappointing US employment data. By mid-August, with improvements in US economic data, market confidence in the US Fed achieving a soft landing increased, turning optimistic about a rate cut in September. Data released last Thursday showed that the US Q2 economic growth was better than expected, cooling expectations of a 50 basis point rate cut by the Fed in September, and investors began gradually building positions in preparation for the upcoming rate cut cycle. From a fundamental perspective, the tight supply situation of nickel ore has not eased, and downstream smelting raw material inventories remain low. If there is no progress in subsequent nickel ore replenishment approvals, ore prices may still have upward potential. In the midstream smelting sector, intermediate product production was below expectations, coupled with tight nickel ore supply, keeping the price of 1.2% nickel ore for hydrometallurgy high, leading to increased production costs. Additionally, the decline in the grade and recovery rate of high-grade nickel matte has increased costs, and the impact of Indonesian pyrometallurgical ore has kept the high-grade nickel matte percentage payable at a high level. Overall, prices in the industrial chain are disturbed to varying degrees by information from the Indonesian ore end. Returning to refined nickel, the accelerated commissioning of electro-deposited nickel has led to a significant increase in global refined nickel inventories. Last week, LME inventories increased by 1,000 mt, and domestic social inventories increased by over 2,000 mt. This indicates that in the face of a large supply of refined nickel, demand remains weak. However, since electro-deposited nickel and refined nickel products are the main references for pricing in the industrial chain, and MHP and high-grade nickel matte pricing is linked to LME prices, nickel prices have strong support within the industrial chain. In summary, under the backdrop of interest rate cuts, the combined influence of favourable macro front sentiment and industrial chain cost pressures is expected to maintain a fluctuating trend with upside potential for nickel prices.