Nickel futures market: A strengthening US dollar ended the recent short-term rally, with LME nickel closing down 1.17% overnight. LME nickel's latest settlement was $18,940 per tonne, a decrease of $225 from the previous session. Trading volume was 7,835 lots. In the domestic market, the overnight session for SHFE nickel settled at 144,650 yuan per tonne, down 1,550 yuan or 1.06%.

LME nickel inventories on May 14 were reported at 275,778 tonnes, unchanged from the previous day.

Today, SHFE nickel futures opened lower across the board. The main contract for June 2024 (2606) opened at 145,250 yuan per tonne, down 950 yuan from yesterday's close. As of 9:15 AM, the main contract was trading at 143,180 yuan per tonne, a drop of 3,020 yuan. SHFE nickel opened lower and continued to trend downwards, maintaining a weak and volatile pattern during the session.

Overseas macro factors: U.S. April PPI data exceeded expectations, significantly dampening market expectations for a June interest rate cut. This led to a strengthening U.S. dollar index. However, supply-side disruptions and safe-haven sentiment have offset some of the pressure from the stronger dollar. U.S. technology stocks showed strong gains, indicating an overall positive market risk appetite.

Domestic macro factors: There has been a marginal tightening of liquidity, and the A-share market is undergoing adjustments, leading to a cautious market sentiment. The downstream consumption sector is clearly in its off-season, with weak recovery in terminal demand. This has become a primary macro factor suppressing domestic nickel prices.

The nickel industry chain currently exhibits an extreme structural divergence. The core raw materials are nickel ore and sulfur, with intertwined supply-demand contradictions and high inventory pressure being the key variables influencing nickel price trends.

The supply side shows a distinct pattern of "long-term contraction, short-term looseness." In the long term, Indonesia has significantly reduced its annual nickel ore mining quota, with core mining areas expected to exhaust their annual quotas and halt production by mid-to-late this month. Concurrently, tensions in the Middle East have disrupted sulfur supply, leading to noticeable reductions in hydrometallurgical capacity. This has resulted in tight supply and continuously rising prices for battery-grade nickel sulfate intermediates. In the short term, however, nickel pig iron and nickel sulfate production capacity continues to be released, keeping spot supply relatively ample.

Demand side shows significant divergence: The traditional stainless steel industry has entered its consumption off-season, compounded by the drag from the real estate market, leading to weak downstream purchasing intent. Demand for new energy batteries maintains steady growth, but the lithium iron phosphate (LFP) battery route is diverting some demand away from high-nickel products, failing to effectively drive a substantial overall demand increase.

Outlook: Short-term volatility with focus on two key events. It is expected that domestic nickel prices will fluctuate within a range of 142,900 to 143,000 yuan per tonne in the short term, showing a downward trend. LME nickel is anticipated to trade between $18,500 and $19,000 per tonne. Upside risks stem from the potential for sulfur shortages to persist beyond June, leading to further reductions in HPAL (High-Pressure Acid Leach) capacity. Downside risks arise from the possibility of Indonesia approving supplementary ore quotas in the third quarter. Investors should closely monitor the release of the Federal Reserve's May meeting minutes in late May and the progress of Indonesia's RKAB quota revisions in July. Structural tightness is expected to support a gradual firming of the nickel price floor.

(Note: This is an original analysis for reference only and does not constitute investment advice. Data support: Changjiang Nonferrous Metals Network www.ccmn.cn Tel: 0592-5668838)