Nickel prices moved sideways around 128,000-130,000 yuan/mt this week, with the most-traded contract rolling from 2609 to 2610 during the week. On Monday, the US dollar weakened and SHFE nickel approached the 130,000 yuan/mt mark intraday; however, the geopolitical premium failed to persist, and futures pulled back in volatile trading over the following four sessions, closing at 128,310 yuan/mt on Friday, down about 630 yuan/mt WoW, a decline of about 0.5%. The LME nickel 3M contract weakened in tandem, falling $180/mt from last Friday, a decline of about 1.1%. The pullback in the US dollar index this week failed to shore up nickel prices, as pressure from ample refined nickel supply outweighed the boost from macro tailwinds. In the spot market, SMM #1 refined nickel averaged 129,910 yuan/mt this week, up 620 yuan/mt WoW. The Jinchuan nickel premium widened initially and narrowed later in the week, temporarily reaching 1,600 yuan/mt mid-week before narrowing by 150 yuan/mt to 1,400 yuan/mt on Friday. Mainstream electrodeposited nickel discounts held at 0-500 yuan/mt mid-week; on Friday, quotes after contract rollover fell to -200 to 400 yuan/mt. Overall spot trading was mediocre this week, with limited downstream purchasing interest.
On the macro front, sticky US inflation and policy maneuvering dominated market sentiment this week. The US July PCE price index released on Thursday came in at 3.7% YoY, unchanged from the previous month and above the 3.6% market expectation, underscoring sticky inflation. Market expectations for a September rate hike by the US Fed increased somewhat, weighing on nonferrous metal valuations. In the bond market, Trump said the $40 trillion US debt problem should be solved through growth, and that he had not instructed Treasury Secretary Bessent to intervene in the bond market. The US Treasury announced during the week an expansion of the scope of secondary sanctions, extending the buyback support approach for debt with high financing costs. Geopolitically, the US-Iran standoff remained volatile. In China, total profits of industrial enterprises above designated size rose 17.6% YoY from January to July, and the industrial economy continued to recover. Shanghai proposed expanding the trading scale of key metals such as copper and aluminum, and accelerating the development of the futures product lineup for emerging metals such as lithium, cobalt, and nickel.
Inventory: The Shanghai Bonded Zone inventory was about 1,400 mt this week, flat WoW. China's social inventory was about 130,000 mt, with destocking of about 1,000 mt WoW.
Nickel prices are currently in a stalemate marked by "rising rate-hike expectations offset by a weaker US dollar, and geopolitical disturbances pulling against ample supply". Downside support comes from losses on electrodeposited nickel production, while high inventory caps the upside. The core trading range for the most-traded SHFE nickel contract (2610) next week is expected to be 126,000-131,000 yuan/mt.
