Easing Supply and High Inventories Weigh on Nickel Prices

This week nickel prices exhibited a weak pattern overall, with the price center continuing to shift lower. At the start of the week, the most-traded SHFE nickel contract (NI2609) edged up, supported by an unexpectedly weak US July nonfarm payrolls report and a softer US dollar index. Subsequently, however, expectations of looser Indonesian supply built, and SHFE nickel ground lower for four consecutive trading days, with losses accelerating on Friday. The contract closed at about 127,040 yuan/mt, down 1.29% on the day, after touching an intraweek low of 126,720 yuan/mt; it fell about 2.6% WoW. The LME nickel 3M contract weakened in tandem, with the latest close at $16,675/mt, down about 1.8% WoW. In the spot market, the average SMM #1 refined nickel price this week was 129,110 yuan/mt, down 2,250 yuan/mt WoW. Jinchuan refined nickel premiums held steady in the range of 1,250-1,300 yuan/mt. Mainstream electrodeposited nickel premiums/discounts were between -200 and 500 yuan/mt, with discounts narrowing somewhat during the week. Spot market trading recovered slightly amid the continued decline in futures this week, and downstream users’ willingness to restock improved from previous levels.

On the macro front, cooling US inflation data and hawkish remarks from Fed officials offset each other this week. US July unadjusted CPI rose 3.4% YoY and core CPI rose 2.5% YoY, both in line with market expectations, weakening investor expectations for a Fed rate hike in September. However, Cleveland Fed President Hammack said the Fed may need to raise rates several times to bring inflation back to its 2% target, and the US dollar index briefly touched a two-week high, weighing on nonferrous metal valuations. On the geopolitical front, US-Iran tensions flared up again—US forces opened fire in the Gulf of Oman on a Panamanian-flagged cargo ship attempting to breach the blockade against Iran. Iran’s Supreme National Security Council reiterated that the Strait of Hormuz will not reopen as long as the US does not accept its terms. However, with the concentrated arrival of sulfur cargoes, production schedules at some Indonesian HPAL projects recovered, easing the earlier marginal pressure from tight sulfur supply. On the domestic front, China’s July CPI rose 0.5% YoY and core CPI rose 0.9% YoY, while overall CPI fell 0.1% MoM. The central bank released its Q2 2026 monetary policy implementation report, stressing that it would continue to implement moderately loose monetary policy, plan and introduce practical and effective incremental policies in a timely manner, and strengthen countercyclical adjustment.

On the inventory front, Shanghai Bonded Zone inventory this week was about 1,400 mt, flat WoW. China’s social inventory was about 134,000 mt, with an inventory buildup of about 300 mt WoW.

Nickel prices are currently in a weak window where expectations of looser supply, wavering macro sentiment, and high inventories are intertwined. On the downside, losses on electrodeposited nickel production provide cost support, while the upside is capped by off-season demand and inventories. Prices are expected to consolidate on a subdued note in the near term. The most-traded SHFE nickel contract is expected to trade mainly within 124,000-130,000 yuan/mt next week.