[SMM Nickel Midday Review] Nickel prices gapped down below 120,000 on October 8, falling after the holiday as US Treasury yields and the dollar both rose during the break

SMM Nickel, October 8:

Macro and market news:

(1) The Fed's September minutes confirmed a hawkish stance but hinted at no rush for October. All 19 policymakers unanimously supported a 25bp hike in September to 3.75%-4.00%, with most expecting one more hike within the year, but keeping options open at each meeting and decisions entirely dependent on data; CME showed the probability of holding rates unchanged in October rose to 79.5%, and the probability of a cumulative 25bp hike by December stood at 68%. During the long holiday, the 10-year Treasury yield broke above 5.36% intraday (a new high since 2002), and the US dollar index shot up to 102.27, approaching an 18-month high, putting global risk assets under pressure.

(2) US-Iran tensions escalated again, and the IEA accelerated reserve releases. Iran said it would soon blockade the "illegal" Strait of Hormuz shipping lane and insisted on its uranium enrichment red line, while Trump said military action against Iran "must be wrapped up"; the IEA announced it would accelerate the release of the previously pledged roughly 100 million barrels of reserves (prioritizing diesel). Oil prices retreated after a rapid rise, with WTI closing down 0.97% at $88.33/barrel and Brent falling below $100 to close at $99.78. The Middle East remains a tail risk for oil prices.

(3) Risk assets played catch-up declines during the long holiday: US stocks fell for three consecutive days (Dow -0.66%), spot gold hit a two-month low, breaking below $4,100 intraday to close at $4,109.63/oz, and silver dropped 2.54%.

Spot market:
On October 8, the average price of SMM #1 refined nickel was 122,200 yuan/mt, down 1,400 yuan/mt from the pre-holiday price (September 30). In terms of spot premiums, the average premium for Jinchuan #1 refined nickel was 4,000 yuan/mt, up 250 yuan/mt from before the holiday, while mainstream domestic brands of electrodeposited nickel ranged from -200 to 500 yuan/mt.

Futures market:
The most-traded SHFE nickel contract (2611) opened lower with a gap after the holiday and trended lower in the morning session, closing at 119,520 yuan/mt by midday, down 2.06% (relative to the pre-holiday settlement price).

Short-term outlook:
On the first trading day after the holiday, SHFE nickel broke below 120,000, playing catch-up with the risk asset repricing during the long holiday that saw the 10-year Treasury yield break above 5.36%, the US dollar surge to 102, and gold fall below 4,100. Going forward, nickel prices remain capped on the upside by high inventory and weak demand fundamentals, while cost support limits the downside. In the short term, the most-traded SHFE nickel contract is expected to trade in the range of 119,000-123,000 yuan/mt.