SMM Nickel News, March 26: Macro and Market News: (1) On March 25, COSCO SHIPPING Lines issued a service notice announcing the immediate resumption of new bookings for services from the Far East to the following Middle East countries (dry containers): the UAE, Saudi Arabia, Bahrain, Qatar, Kuwait, and Iraq. The resumption of shipments did not mean that COSCO SHIPPING container vessels could pass through the Strait of Hormuz. (2) In the early hours of March 25, Tehran time, Iran's Permanent Mission to the United Nations said in a statement on social media that non-hostile vessels could safely pass through the Strait of Hormuz in coordination with relevant Iranian authorities, provided that the countries to which they belong or with which they are associated neither participate in nor support acts of aggression against Iran, and fully comply with the announced safety and security regulations. Spot Market: On March 26, the SMM price of #1 refined nickel rose by 1,550 yuan/mt from the previous trading day. In terms of spot premiums, the average premium for Jinchuan #1 refined nickel was 5,400 yuan/mt, down 750 yuan/mt from the previous trading day; domestic mainstream electrodeposited nickel was at -400-400 yuan/mt. Futures Market: The most-traded SHFE nickel contract (2605) opened sharply higher in last night's session and then fluctuated downward, closing the morning session today at 135,250 yuan/mt, up 0.50%. Policy expectations that Indonesia may impose a nickel export tax, together with firm ore prices on the raw material side and easing macro sentiment, jointly drove nickel prices to rebound. Nickel prices are expected to hold up well in the short term, with the core trading range of the most-traded SHFE nickel contract at 133,000-143,000 yuan/mt.

[SMM Magnesium Weekly Review: Magnesium Market Held Up Well, With Cost Support and a Tug-of-War Between Sellers and Buyers Continuing] This week, the overall magnesium industry chain held up well, with prices of all products generally raised. The raw material dolomite market remained stable, with ample supply and steady demand. Magnesium ingot prices consolidated at highs. At the beginning of the week, supported by rising energy costs such as ferrosilicon and coke and tight spot availability, prices jumped by 300 yuan/mt. Subsequently, downstream fear of high prices emerged, transactions failed to keep pace, and prices consolidated at highs. In foreign trade, the center of magnesium ingot FOB quotes moved up to $2,440-2,470/mt. Wait-and-see sentiment outside China remained strong, but influenced by bullish expectations in China, forward orders were gradually locked in. Magnesium powder prices remained firm, with strong cost support. Export data increased YoY, while domestic trade was mainly driven by just-in-time procurement. The benchmark price of magnesium alloy held up well, but the release of new capacity led to increased supply, processing fees stayed in the doldrums, and the market showed a pattern of strong supply and weak demand. Overall, cost support remained the core driver behind magnesium prices fluctuating at highs, while downstream acceptance of high prices was limited, and the market may continue this tug-of-war in the short term.

Today, the most-traded BC copper 2604 contract opened at the intraday low of 82,550 yuan/mt, then fluctuated upward in early trading. After the daytime session opened, the center of copper prices surged in a straight line to a high of 85,250 yuan/mt, then moved in wide swings and finally closed at 84,610 yuan/mt, up 1.22%. Open interest stood at 4,302 lots, down 643 lots from the previous trading day, while trading volume reached 3,695 lots, indicating bears reduced positions. On the macro front, the US Department of Justice admitted it lacked evidence for its investigation into Powell, and his term is expected to be extended; coupled with renewed market expectations for easing tensions in the Middle East and somewhat alleviated inflation concerns, the US dollar weakened, and multiple positive factors jointly boosted copper prices. Fundamentally, on the supply side, arrivals of both domestic and imported cargoes were steady, with ample market circulation; on the demand side, affected by rising copper prices, downstream purchasing sentiment pulled back, with procurement maintained only for rigid demand. The SHFE copper 2604 contract closed at 95,550 yuan/mt. Based on the BC copper 2604 contract at 84,610 yuan/mt, its after-tax price was 95,609 yuan/mt. The price spread between the SHFE copper 2604 contract and BC copper was -59, with the spread inverting again.

Silver has seen one of the sharpest pullbacks in recent years within just a few weeks. From the high of US$97.30 on March 2, the price fell to US$61.21 by March 23, losing around 37%. For the market, this was an abrupt break from the previous momentum.

On Tuesday, Eastern Time, Chicago Fed President Goolsbee warned that the energy shock stemming from the Middle East conflict is threatening the US Fed’s dual mandate, complicating its monetary policy outlook and potentially delaying interest rate cuts—echoing earlier remarks by Fed Governor Barr that inflation risks and oil prices support keeping rates unchanged for longer. Specifically, the energy price shock poses risks to both sides of the US Fed’s dual mandate, making the trade-off between controlling inflation and supporting economic growth more complex. “The new shock has undoubtedly disrupted the US Fed’s plans... and inflation was already uncomfortably high even before the shock occurred,” Goolsbee said bluntly. Goolsbee noted that central bank policymakers around the world lack clear historical experience to draw on in dealing with the current mix of geopolitical risks and inflationary pressures, and therefore “this is a bad situation for central banks.” Goolsbee stressed that the current path of interest rates at central banks around the world still depends heavily on how the conflict evolves, especially its impact on energy markets. As for the US Fed, he said he is not yet able to judge whether it will be able to cut interest rates again, because that outlook depends on the duration of the conflict and the extent to which rising oil prices affect overall inflation. “Only if inflation shows improvement can one realistically expect rates to fall this year,” he added, further reinforcing the US Fed’s data-dependent stance. The US Fed’s Internal Stance Is Turning More Cautious These remarks by Goolsbee were highly consistent with earlier comments by Fed Governor Michael Barr. Barr had previously also emphasized that, given that US inflation remains above target and elevated oil prices are further pushing up inflation, interest rates may need to remain unchanged “for some time.” In addition, Barr likewise pointed out that although the US labour market appears to be stabilizing, US Fed officials need to see clear evidence of sustained disinflation before considering interest rate cuts. Taken together, these comments highlight the US Fed’s increasingly cautious shift in stance. As geopolitical developments exert a growing influence on the US inflation outlook, the combination of persistent price pressures and external shocks has reinforced expectations that high inflation will last longer, while also creating uncertainty over the feasibility of further policy easing in the near term. For markets, the key point is that after the Russia-Ukraine shock several years ago, energy-driven inflation risks have now been firmly incorporated into the US Fed’s reaction function. As a result, US Fed rate expectations may remain sensitive not only to economic data, but also to developments in the Middle East conflict and their impact on oil prices.

[Overnight, LME Aluminum and SHFE Aluminum Edged Up Slightly, but Aluminum Prices Faced Short-Term Pressure at High Levels] Continued destocking in LME inventory provided bottom support for LME aluminum, but amid tightening fund liquidity and profit-taking by bulls, upward momentum remained insufficient, and the backwardation structure weakened somewhat. China’s social inventory rose to a high for the same period in nearly five years, and the inventory buildup cycle had yet to end, with high inventory and weak spot fundamentals jointly weighing on upward momentum. The divergence between domestic and overseas drivers continued, the SHFE/LME price ratio kept weakening, and prices were mainly under pressure in the short term.