[SMM Analysis] Nickel Prices Fluctuate Amid Indonesian Supply Disruptions and Market Sentiment Volatility

Nickel prices experienced a pattern of retreating after a rapid rise and fluctuating at highs this week. At the beginning of the week, driven by supply-side disruptions in Indonesia, nickel prices in both domestic and overseas markets strengthened simultaneously, with LME nickel once climbing back above $18,000/mt. However, by mid to late week, a stronger US dollar and continued inventory buildup on the LME exerted downward pressure on prices, leading to a slight correction in nickel prices. As of Friday, the most-traded SHFE nickel 2605 contract closed at 140,980 yuan/mt, posting a weekly gain of 3.46%; LME nickel also rose over 3% for the week. In the spot market, the average price of SMM #1 refined nickel this week was 143,450 yuan/mt, up 2,550 yuan/mt WoW. The average premium for Jinchuan nickel this week was 8,300 yuan/mt, down 1,000 yuan/mt compared to the week before the Chinese New Year. The premiums and discounts for mainstream domestic brands of electrodeposited nickel ranged from -600 to 300 yuan/mt, also declining. Spot trading activity was relatively mediocre in the first week after the post-Chinese New Year resumption of work; market participants mostly adopted a wait-and-see attitude amid rising nickel prices, and with some end-users resuming operations at a slower pace, only a few enterprises made their first round of just-in-time procurement after the holiday.

On the macro front, the US dollar index rose slightly by 0.2% this week, and the market remains divided over the policy path of the incoming US Fed Chair Warsh. Geopolitically, progress in US-Iran negotiations has been limited; while differences persist, the two sides are nearing consensus in some areas, with technical talks scheduled for March 2. Repeated fluctuations in the geopolitical situation continue to impact market risk appetite. Domestically, the central bank continued to precisely inject liquidity through open market operations this week to maintain stability in the quarter-end funding environment.

Inventory side, Shanghai Bonded Zone inventory stood at approximately 2,200 mt this week, flat WoW. Domestic social inventory was around 77,000 mt, with an inventory buildup of about 2,000 mt WoW.

In the short term, nickel prices are expected to enter a phase of fluctuations. On the downside, supply disruptions in Indonesia and expectations of a supply gap provide a floor, limiting significant downside room; on the upside, persistently high inventory levels and weak spot demand present clear resistance to further rises. The core fluctuation range for the most-traded SHFE nickel contract next week is projected at 135,000-145,000 yuan/mt.