Nickel prices rose initially but fell later this week. Production cut news across Indonesia's industry chain drove a notable rebound mid-week, though Friday saw some gains pared as risk-off sentiment intensified. The most-traded SHFE nickel 2611 contract closed at 121,420 yuan/mt as of October 22, up 6,380 yuan/mt from last Friday, a gain of about 5.5%; it pulled back to 119,460 yuan/mt by midday on October 23. The LME nickel 3M contract closed at $16,290/mt on Wednesday and pulled back to $15,995/mt on Thursday, still up $625/mt from last Friday, a gain of about 4.1%. In the spot market, SMM #1 refined nickel averaged 121,320 yuan/mt this week, up 1,710 yuan/mt WoW; Jinchuan nickel premiums averaged 4,650 yuan/mt on Monday before easing to 4,200 yuan/mt on Friday, while mainstream electrodeposited nickel premiums shifted from a range of 0-600 yuan/mt to -200-600 yuan/mt. Spot premiums broadly pulled back during the futures rally, suggesting the rebound has yet to be fully supported by a simultaneous improvement in spot demand.
On the macro front, the market this week shifted between easing rate-hike expectations and renewed risk-off sentiment. US September CPI released last week rose 3.7% YoY and 0.6% MoM, while core CPI rose 2.6% YoY and 0.3% MoM, keeping inflationary pressure a constraint on US Fed policy. Early in the week, Fed officials' remarks cooled market expectations for an October rate hike, temporarily easing macro pressure; however, later in the week, Middle East tensions, elevated energy prices, and declines in global risk assets again weighed on market sentiment, with nonferrous metals under pressure on Friday. In China, preliminary Q3 GDP rose 4.5% YoY, rebounding from Q2's 4.3%, providing some support to market expectations, though the transmission of macro stabilization to actual demand in the nickel industry chain still needs to be observed.
At the industry level, expectations for production cuts across Indonesia's nickel industry chain became a key driver of this week's nickel price rebound. Mid-week, market talk of "50% MHP production cuts, 50% high-grade nickel matte production cuts, and 20% nickel pig iron production cuts" circulated, with supply contraction expectations helping repair market sentiment and triggering short covering. Across segments, MHP faces weakening demand, declining payable indicators, and cash cost losses, giving enterprises strong motivation to proactively cut production. According to SMM scenario estimates, if existing MHP production were cut by 50%, the monthly reduction would be about 15,000-18,000 mt (Ni contained); if the industry operating rate were reduced to 50%, the corresponding reduction would be about 12,000 mt (Ni contained). High-grade nickel matte production has already contracted significantly, so the marginal impact of further cuts is relatively limited, and most ongoing supply involves long-term contract deliveries; nickel pig iron, while disrupted by factors such as drought, still retains cash profits at the smelting stage, making large-scale coordinated proactive production cuts difficult to execute. Overall, the production cut news has eased pessimistic expectations about oversupply, but the specific ratios, implementation baselines, and duration have yet to be officially confirmed. This rally remains primarily expectation-driven, and attention should be paid to actual production schedules and the realization of supply reductions.
On the inventory front, nickel inventory in the Shanghai Bonded Zone stood at 1,400 mt this week, down 500 mt WoW; domestic nickel plate social inventory was 121,836 mt, about 121.8 kt, down 1,100 mt WoW, a decline of about 0.9%. Domestic social inventory continued to destock, with the pace of decline widening from last week's 602 mt, while bonded zone inventory also pulled back. However, total domestic inventory remains high, and attention should be paid to the sustainability of destocking and the actual implementation of industry chain production cuts.
Nickel prices currently sit amid a combination of "rebounding US inflation and rate-hike expectations weighing on prices" and "some spot premiums strengthening and lingering expectations of Indonesian supply disruptions." Higher Jinchuan nickel premiums and modest social inventory destocking provide some support, but high inventory and weak downstream demand continue to cap the rebound. Overall, the most-traded SHFE nickel 2611 contract is expected to consolidate on a subdued note next week, with focus on US Fed policy signals, the realization of Indonesian supply cuts, and refined nickel inventory changes.
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