In the nickel futures market, a surprising ADP report fueled dovish expectations, leading London nickel to stand out with a 0.49% overnight gain. The latest closing price for LME nickel was $16,390 per tonne, up $80, representing a 0.49% increase on a volume of 9,977 lots. In the domestic market, the main Shanghai nickel contract settled at 126,270 yuan per tonne overnight, declining 130 yuan for a 0.1% loss. LME nickel inventories reported on July 1 were 274,230 tonnes, a decrease of 210 tonnes from the previous day.
According to the latest update, Shanghai nickel futures opened mostly lower today. The main September 2609 contract opened at 126,410 yuan per tonne, up 10 yuan from the prior close. By 9:10 AM, the September contract was quoted at 126,450 yuan, a gain of 50 yuan, trading in a narrow range after a higher open. On the macro front, LME base metals were broadly lower overnight, showing structural divergence, with nickel bucking the trend to be the sole gainer, closing up 0.49%. This resilience is attributed to solid underlying demand from the new energy sector and supply growth falling short of expectations, providing firm fundamental support. Zinc led the declines with a sharp drop, while aluminum hit its lowest level since late February. Overseas, progress in US-Iran indirect talks in Doha led to a more than 3% single-day drop in international oil prices, weakening cost support for energy-intensive metals. Hawkish signals from the Federal Reserve bolstered the US dollar, with the upcoming non-farm payrolls data becoming the core variable for global asset pricing. A pullback in US tech stocks dampened risk appetite. Domestically, robust demand from high-end electronics manufacturing and the new energy sector provides a floor, while new A-share trading rules and summer travel consumption benefits support domestic demand recovery. Amid these mixed bullish and bearish factors, the market awaits guidance from the non-farm payrolls report.
Full Industry Chain Supply-Demand Analysis: Shifts in Five Key Segments
Significant divergence is evident upstream in the mining sector. Laterite nickel ore supply continues to tighten from major mining areas, impacted by Indonesia's annual mining quota reduction of over 30%. Core mining areas like Weda Bay have entered a production halt and maintenance period, establishing a tight supply-demand balance for ore. Global supply of sulfide nickel ore remains stable, with limited new capacity coming online, constraining overall growth potential.
The pace has slowed in midstream smelting. The release of high-grade matte nickel capacity is slower than anticipated, and new pyrometallurgical capacity additions are limited in scale due to policy restrictions, with commissioning periods for some new projects extended. Mixed Hydroxide Precipitate (MHP) production costs have risen significantly, pressured by high international sulfur prices, leading several hydrometallurgical projects to lower operating rates. Actual supply increments are below initial year-start expectations. In the recycled nickel segment, collection volumes have improved with recovering downstream alloy demand, but overall supply remains inelastic, insufficient to fill the gap from reduced primary nickel supply.
Outlook and Investor Strategy
In the near term, nickel prices are expected to maintain a narrow range-bound pattern. The core fluctuation range is projected between 124,000 and 127,000 yuan per tonne in the domestic market, with LME nickel referenced between $16,300 and $16,600 per tonne. This week's US non-farm payrolls data will be a key macro variable. Weaker data reinforcing rate cut expectations could support an upward price breakout, while stronger data could keep the dollar pressured, potentially leading to another downward test. From a medium-term perspective, the effects of supply contraction from Indonesia will gradually transmit to the smelting sector, continuously narrowing the supply-demand surplus, laying a foundation for a higher nickel price center.
Operationally, investors are advised to maintain a light-position, range-trading approach, avoiding chasing rallies or selling into panics. Short-term trading can involve buying near range support and selling near resistance, with strict stop-losses. Medium to long-term positions can consider building long positions on dips, focusing on tracking the implementation of Indonesian mining policies, changes in LME inventories, and production schedules in downstream new energy sectors.
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