[SMM Analysis] Supply Shocks Pushed Nickel Prices Higher This Week

Nickel prices trended higher in a volatile manner this week, with supply-side news serving as the core driver of price movements. At the beginning of the week, the most-traded SHFE nickel contract opened low near 140,010 yuan/mt. Mid-week, news that Indonesia's Weda Bay planned to halt production in May, combined with cost-side factors such as the implementation of Indonesia's new HPM tax policy and surging sulfur prices, pushed nickel prices higher for three consecutive days. On Friday, prices briefly broke through 146,000 yuan/mt, with a weekly gain of 0.99%. LME nickel strengthened in tandem, reaching a high of $18,850/mt, with a weekly gain of 4.11%. Spot market, the weekly average price of SMM #1 refined nickel was 142,770 yuan/mt, up 2,000 yuan/mt WoW. Jinchuan nickel premium declined to 1,900 yuan/mt, and mainstream domestic electrodeposited nickel remained at a discount. Rising futures prices this week suppressed downstream pricing willingness, and overall trading was mediocre.

Macro and market news, SHFE added two Indonesian refined nickel delivery brands "Yongheng" and "Dingxing" this week, further expanding the channel for low-cost Indonesian electrodeposited nickel to register for delivery in the Chinese market, which will exert sustained restocking pressure on SHFE warrants and domestic refined nickel social inventory. Starting from the evening of April 21, overseas investors were officially permitted to participate in SHFE nickel futures and options trading, further enhancing the openness of the nickel product. On the macro front, Trump extended the US-Iran ceasefire deadline last week, but substantial progress in US-Iran negotiations was severely lacking this week. Iran stated it had "no plan to engage in negotiations in the near term," and both sides continued to blockade the Strait of Hormuz as a bargaining chip, with tensions re-escalating. Fed Chairman nominee Kevin Warsh explicitly refused to commit to interest rate cuts at a confirmation hearing held by the Senate Banking Committee this week, stating he would focus on "underlying inflation."

Inventory, Shanghai Bonded Zone inventory was approximately 1,700 mt this week, flat WoW. Domestic social inventory was approximately 97,000 mt, an inventory buildup of about 3,300 mt WoW.

Looking ahead, Indonesia's quota tightening policy continued to strengthen, the sulfur supply crisis intensified, MHP production was hampered, and sulfur prices continued to rise amid tight supply, providing strong cost support. Combined with recent news of production halts and cuts at Indonesian smelters, nickel prices are expected to hold up well. The most-traded SHFE nickel contract is expected to trade in the range of 140,000-150,000 yuan/mt next week.