The impact of Russian nickel fire subsides! Will the market give up the recent premium?

1. Industry news



1.1 Goldman Sachs downgrades the U.S. economic growth forecast for 2023


Goldman Sachs lowered its economic growth forecast for 2023 to 1.1% from 1.5%. The growth forecast for 2022 will remain unchanged at 0%. Goldman Sachs raised the federal funds rate forecast by 75 basis points in the past two weeks, and now expects the final interest rate to rise to 4% – 4.25% by the end of 2022.


Goldman Sachs also raised its unemployment rate forecast to reflect the slowdown in economic growth. It said that the unemployment rate would reach about 3.7% by the end of 2022, compared with the previous expectation of 3.6%. The prediction of the unemployment rate at the end of 2023 and 2024 will be raised from 3.8% and 4% to 4.1% and 4.2% respectively.


1.2 Fire in Russia’s largest nickel plant


The factory fire is the nickel electrolysis workshop of Kola Mining and Metallurgy Company (Kola MMC). The fire quickly spread from the ground to the upper layer of the huge industrial facilities in the suburb of the northern city of Monchegorsk.


According to the video released on the on-site social media, the fire lasted for a long time. The company is a subsidiary of Norilsk Nickel, the largest nickel producer in Russia. The company accounts for about 10% of the world’s nickel supply.


Five years ago, after the old nickel factory in Norilsk, Tamil Peninsula was closed, the factory in Baikame, Monchegorsk became the largest nickel factory in the world.


2. Message interpretation


From the macro perspective, according to the observation of the CME Federal Reserve, the probability of the US interest rate increase of 75bp in September rose to 82%, and the US dollar is still strong, which will still create some pressure on the non-ferrous sector. Although the uncertainty is small, we still need to pay attention to the decision of the Federal Reserve to raise interest rates in the week.


On the domestic side, the central bank’s competent media predicted that with the implementation of a package of stable growth policies and their follow-up policies, the domestic economic rebound momentum will be consolidated and strengthened, and the RMB exchange rate will eventually return to reflect the stable and good fundamentals of China’s economy.


Therefore, from the perspective of domestic economy, stable growth is still the main theme.


In terms of industry, the electrolysis plant of a subsidiary of Rusal Nickel suffered from fire. Russian nickel accounts for about 10% of the global nickel supply output. However, the fire occurred in the subsidiary’s electrolysis workshop, which is expected to have limited impact on the actual supply, and more emotional panic.


Therefore, the nickel price was extremely strong last Friday night. At present, the impact of the event should have ended.

3. Variety logic



The production schedule of stainless steel recovered on a month on month basis in September, which led to an increase in demand for ferronickel. The price of ferronickel was firm, forming a certain support for the price of electrolytic nickel.


However, in the medium term, the release of a large amount of ferronickel capacity in Indonesia will lead to excessive supply of ferronickel, so ferronickel prices will return to a weak position in the medium term. As the price difference between electrolytic nickel and ferronickel is still at a high level, short-term support for electrolytic nickel prices, although there is, will not be too strong.


The impact of the time when the Russian nickel plant caught fire is limited, and the current price should have fully digested it.


In terms of demand, the nickel bean self melting technology of nickel sulfate is still economical, or will increase the demand for nickel beans.


In the medium and long term, the trend of nickel oversupply is obvious, and the price center will gradually fall back.


Operation suggestions:

Short sellers insist on holding, or they may create short orders when high.

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