SMM Nickel News, June 4: Macro and market news: (1) US President Trump said in an interview on June 3 local time that a deal with Iran is being reached. He also said Iran has agreed not to possess nuclear weapons and that he might meet with Iran's Supreme Leader at some point. (2) Iran's Supreme Leader approved the establishment of a working group on the Strait of Hormuz issue. Iranian media reported that the Strait of Hormuz management draft has entered the review stage. An Iranian official said Iran would negotiate with the US if necessary. Spot market: On June 4, SMM #1 refined nickel prices fell 2,950 yuan/mt from the previous trading day. Spot premiums: Jinchuan #1 refined nickel averaged 800 yuan/mt, up 100 yuan/mt from the previous trading day; domestic mainstream brand electrodeposited nickel ranged from -700-300 yuan/mt. Futures market: The most-traded SHFE nickel 2607 contract opened lower and continued to weaken during the session, once breaking below the 140,000 yuan/mt level. As of the morning close, it settled at 140,480 yuan/mt, down 2.55%. In the short term, nickel prices may remain supported by costs on the downside while capped by inventory buildup on the upside. The reference range for the most-traded SHFE nickel contract is 138,000-148,000 yuan/mt.

[SMM Morning Meeting Minutes: US ADP Employment Data Falls Short of Expectations, LME Zinc Center Moves Lower] Overnight, LME zinc opened at $3,636/mt. At the beginning of the session, LME zinc fluctuated around the daily average line. As the European trading session began, bulls increased their open interest, and LME zinc oscillated higher to touch $3,658/mt. Prices at night session continued to pull back, dipping to $3,593/mt. Toward the end of the session, prices stopped falling and rebounded, slightly recovering lost ground, ultimately closing lower at $3,603/mt, down $27.5/mt, a decline of 0.76%. Trading volume decreased to 88,462 lots, and open interest increased by 3,764 lots to 231,000 lots.

SMM June 3 update: [SMM] On June 3, SMM A00 aluminum (Foshan) was quoted at 24,320 yuan/mt, up 130, at a discount of 250 to the current-month contract, widening by 10 (unit: yuan/mt). Futures continued to rise during today's daytime session, and the spot market landscape in South China remained largely similar to the previous day. Steady inventory destocking combined with expectations of a weakening spot-futures price spread amid rising prices prompted holders—primarily hedging-oriented—to hold prices firm and slow shipments. Some outright sellers again took advantage of high prices to increase their selling intensity, creating some downward drag. However, the former group overall maintained active control over the extent of concessions, with mainstream quotations at a discount of 10-0 yuan/mt. Supply-side pressure remained generally manageable. On the demand side, downstream willingness to rush to buy amid continuous price rise and restock weakened somewhat, with rigid support relatively lackluster. Traders continued their pace of gradually entering the market to purchase, with moderate demand for buying at a discount, which to some extent compensated for insufficient downstream momentum. Overall transactions were lukewarm. Spot transaction prices were concentrated at a premium of -270 yuan/mt to -230 yuan/mt over the SHFE aluminum 2606 contract.

The 2025 2nd SMM Southeast Asia Automotive Supply Chain Conference was successfully held, featuring the launch of 10 new car models, Southeast Asia brand strategies from three automakers, and SMM's local steel prices in Thailand. The event facilitated efficient matchmaking between 12+ buyers and 60+ suppliers, and preliminarily established a communication platform for the entire automotive industry chain in Southeast Asia. Currently, the NEV industry in Southeast Asia is entering a critical development phase. Thailand, Indonesia, and Vietnam each have their own strategic layouts and breakthroughs, while the industry also faces challenges such as supply chain restructuring, competition over technology roadmaps, and localization compliance. Thanks to the support from all parties, SMM's local pricing systems in Thailand and Indonesia have been implemented and adopted by core enterprises, establishing a credible cost benchmark for the industry. 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Bank of England Governor Bailey released a clearly dovish signal, stating that against the backdrop of a weak economy, the central bank can tolerate inflation running above the 2% target for a period — a statement that significantly cooled market expectations for a June rate hike. On May 29, Bailey spoke at an economic conference in Reykjavik, Iceland, explicitly stating that "tolerating inflation temporarily above target to support the real economy, against a backdrop of a weak real economy and uncertainty about the scale and duration of the shock, is the appropriate way to handle this trade-off." However, he warned that this tolerance would diminish should signs of second-round effects emerge. The above remarks suggest Bailey is unlikely to support a rate hike at the Monetary Policy Committee's June 18 meeting. Market reactions adjusted accordingly — the interest rate swap market currently prices in only one 25-basis-point rate hike by the end of 2026, whereas as recently as late April, markets had expected three rate hikes this year. The surge in energy prices triggered by Middle East tensions has put the UK at risk of a second cost-of-living crisis in less than five years. Bailey's speech indicated that the Bank of England is prioritizing the prevention of further economic deterioration, but the high uncertainty surrounding the inflation outlook continues to keep policymakers treading carefully. Removal of Interest Rate Cut Expectations Has Constituted Substantive Tightening Bailey stated that by abandoning the previously market-expected path of interest rate cuts, the Bank of England has effectively tightened policy to a considerable degree. Before the US and Israeli attack on Iran in late February, investors had expected the Bank of England to cut interest rates by 50 basis points this year in two moves. After the conflict broke out, expectations reversed to rate hikes of an equivalent magnitude. This shift in expectations drove a sharp climb in UK gilt yields, which in turn raised borrowing costs for households and enterprises. "By taking the expected rate cuts off the table, we have significantly tightened policy relative to market expectations, and that is already having an impact on the economy," Bailey said. This means that even if the central bank holds rates steady, the substantive tightening of financial conditions is already working to cool inflation, providing a rationale for standing pat. Economy Under Pressure: Consumption and Investment Both Contract Amid Energy Shock The rise in energy prices stemming from the Middle East conflict is dragging on the UK economy across multiple dimensions. The latest data showed that consumer spending declined, enterprises delayed investment, accumulated inventory, and cut staff, with high energy costs and domestic political uncertainty compounding each other, notably weakening economic momentum. Purchasing managers' survey data also corroborated this trend — surveys released this month showed that business activity slowed sharply after a strong start to the year. Meanwhile, the labour market continued to loosen, with Bailey stating during the Q&A session that "the picture of a gradual softening in the labour market is coming through quite consistently." UK inflation fell to 2.8% in April from 3.3% in March, but analysts noted that this was largely attributable to one-off measures announced by the government in November, and the Bank of England expects inflation to rebound in the coming months. Second-Round Effects: The Core Variable in the Policy Dilemma Although Bailey leaned toward keeping rates stable, he remained highly vigilant about the risk of second-round effects — where energy price shocks trigger significant wage increases, which in turn drive enterprises to raise prices again, creating an inflationary spiral. Bailey acknowledged that there were divisions within the Monetary Policy Committee on this issue. Some members worried that UK wage growth next year could be too rapid, while more dovish colleagues argued that rising unemployment would suppress this risk. Bailey noted that since most wage agreements this year were negotiated before the conflict broke out, the wage data available to the central bank in the coming months would be very limited, potentially leading to a situation where inflation expectations rise without a corresponding acceleration in wage growth. He also cited the lesson from four years ago as a warning — when inflation triggered by the Russia-Ukraine conflict once surged to double digits. "Because second-round effects take longer to transmit, the case for looking through indirect effects is actually weaker; if indirect effects persist for too long, unless monetary policy responds in a timely manner, inflation will remain above target for an extended period," Bailey said. Market Reaction: Rate Hike Expectations Cooled Significantly Throughout May, market expectations for Bank of England rate hikes declined substantially. The interest rate swap market currently prices in only one 25-basis-point rate hike by the end of 2026, a notable shift compared with the three rate hikes expected in late April. Initial market reaction following Bailey's speech was mediocre. He was subsequently set to be interviewed by Stephanie Flanders, Bloomberg's Editor-in-Chief for Economics and Government Affairs, which may provide further policy clues. The Monetary Policy Committee meeting on June 18 will be the next important period. Bailey's remarks provided a fairly clear signal for holding rates steady, but the evolution of the inflation outlook — particularly energy price trends and wage data — will remain the key variables determining the policy direction.

During December 2025 to May 2026, the CAS Institute of Metal Research completed 2,800 kg of ammonium perrhenate procurement amid concentrated supplier supply and a nearly 90% six-month price surge, with tight market supply driven by manufacturers’ inventory hoarding and robust institutional and corporate demand, keeping prices upward.