This week, nickel prices exhibited a pattern of repeated fluctuations. As of May 16, the average price of SMM1# refined nickel was reported at 126,140 yuan/mt, up approximately 0.7% WoW. The most-traded SHFE nickel contract closed at 124,060 yuan/mt, up slightly by 1.65% WoW, while LME nickel prices closed at $15,665/mt, down 1.17% WoW. Early in the week, nickel prices rebounded due to bullish factors such as the US-China trade tariff agreement and rumors of a mining ban in the Philippines. However, the upside potential remained constrained by high inventory pressure resulting from supply-demand surplus, and the momentum for nickel prices to break through the 127,000 yuan/mt price platform was insufficient.
On the macro front, the current bullish drivers in the market are primarily the easing of US-China trade tensions, with both sides reaching an agreement to "remove 91% of tariff hikes." Additionally, US inflation cooled, with the April CPI YoY growth rate at 2.3% (a three-year low) and core CPI YoY at 2.8%, alleviating market concerns about a more hawkish US Fed. However, expectations for US Fed interest rate cuts have been postponed, with the extent of interest rate cuts this year narrowing from 75 basis points to 55 basis points, and the timing of the first interest rate cut delayed to September, injecting some pessimism into the market. From the perspective of industrial fundamentals, the surplus situation of nickel remains unchanged, with weakened cost support. The boost to downstream nickel demand from the reduction in US-China tariffs has yet to materialize, and transactions are still dominated by just-in-time procurement, with low stockpiling sentiment.
In the outlook, SMM believes that nickel prices will continue to fluctuate amid the tug-of-war between cost support and supply-demand surplus. The spot price range for refined nickel is expected to be 122,150-130,000 yuan/mt, and the fluctuation range for SHFE nickel is expected to be 120,000-128,000 yuan/mt. However, attention should still be paid to the sentiment disturbances caused by policy variables on nickel prices.
