The nickel futures market is under pressure, with prices expected to decline. A strengthening US dollar and profit-taking by bullish traders have weighed on the market. Overnight, LME nickel closed down 0.05% at $19,215 per tonne, a decrease of $10, with a trading volume of 6,324 lots. In the domestic Chinese market, SHFE nickel closed the night session at 144,190 yuan per tonne, down 400 yuan or 0.28%.
LME nickel inventories stood at 275,340 tonnes as of June 2, a decrease of 1,104 tonnes from the previous day.
Market Analysis and Outlook
Today, SHFE nickel contracts opened higher across the board. The main July 2607 contract opened at 145,200 yuan per tonne, up 610 yuan from the previous close. However, by 9:15 AM, the same contract was quoted at 143,710 yuan, down 880 yuan, indicating a pattern of opening high and moving lower, with the market maintaining a weak and volatile trend.
On the macroeconomic front, the US dollar index staged a V-shaped rebound overnight. Expectations for a Federal Reserve interest rate hike continue to build, putting valuation pressure on dollar-denominated industrial metals. The US stock market exhibited extreme divergence, with the semiconductor sector performing well but leading tech giants collectively weakening. This has sparked widespread concern about a potential slowdown in demand within the AI industry chain. Compounding this, concentrated profit-taking by previously bullish nickel traders has accelerated capital outflows from the nickel market into safe-haven assets. The confluence of these multiple factors drove a noticeable decline in overnight LME nickel prices.
Structural Divergence in Nickel Supply Chain
The nickel raw materials market currently shows a clear pattern of divergence. Lateritic nickel ore supply remains tight for high-grade material, influenced by Indonesia's plan to cut its RKAB quota by 30% in 2026. Global resources for sulfide nickel ore are scarce, limiting production growth. The pace of conversion to nickel matte has been slow, with increments falling short of market expectations. Nickel-cobalt hydroxide (MHP) supply has seen the most significant reduction, impacted by soaring sulfur prices due to Middle East geopolitical conflicts, leading to maintenance shutdowns at several smelters. Recycled nickel production is growing slowly, constrained by scrap supply.
Current Industry Dynamics and Key Focus
The overall industry chain is characterized by "upstream cost support, midstream inventory divergence, and weak downstream demand." Policy uncertainty has increased at the upstream mining end. Midstream nickel sulfate inventories are operating at low levels. Downstream stainless steel demand has entered its traditional off-season. Demand for ternary materials in the new energy sector, while recovering somewhat, remains primarily driven by essential needs. Today's market focus will be on the latest developments in US-Iran negotiations, speeches by Federal Reserve officials, and policy dynamics regarding Indonesian nickel ore.
Forecast for Nickel Price Movement
In the short term, nickel prices will contend between cost support and pressure from high inventories. It is estimated that LME nickel will trade within a range of $19,100 to $19,300 per tonne today. Domestic spot nickel prices in China are expected to range between 143,000 and 145,000 yuan per tonne. Trading strategy should adopt a range-bound approach, with close attention to the key support level at $19,000 per tonne. A break below this level could lead to a further decline towards $18,800 per tonne.
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