SMM comment: LME nickel inventories accumulated more than 2,000 mt in one day, sending nickel price plummeting

SHANGHAI, Dec 20 (SMM) – At the opening of yesterday, the price of the most-traded SHFE nickel contract fell 3.52%. The decline narrowed to 1.71% as of the closing day. LME nickel price has fallen sharply since December 18, down 3.34% at 15:01 on that day. LME nickel inventories have accumulated significantly, which is bearish for nickel prices.

Spot market

Yesterday’s average spot price of SMM 1# refined nickel was 131,850 yuan/mt, down 1.90% from the previous day.

According to SMM research, on December 19, the spot premium of Jinchuan nickel stood at 3500-3600 yuan/mt, up 100 yuan/mt from the previous day. The price of Norilsk nickel discount was 0-200 yuan/mt, keeping stable compared to the previous day. In the morning, the most-traded SHFE nickel contract continued to drop, the spot premium was raised compared with the previous day. In terms of the spot market transaction, Jinchuan nickel plates was popular.

Fundamentals

Supply and demand side: pure nickel production is expected to rebound in December compared to November, mainly because some enterprises reduced production in November due to equipment maintenance. It is anticipated that maintenance will be completed in December, leading to a recovery in production.

In terms of output, SMM predicts the national refined nickel output to be 23,200 mt in December, a slight MoM increase. Currently, nickel prices have shown signs of bottoming out. Additionally, coupled with the increased supply of refined nickel raw materials and the poor downstream demand in December, the price of raw materials is likely to fall. Overall, the national refined nickel output may rise slightly in December.

Inventory: Domestically, SMM data shows the weekly refined nickel inventory in China's six regions last week was 17,695 mt, up 298 mt compared with the last Friday. Among them, the inventory of nickel briquettes remained unchanged compared with the previous week, and the inventory of nickel plates accumulated 298 mt. SHFE nickel price fell slightly. According to SMM research, the domestic nickel plate transaction has picked up during the week. However, affected by a smaller-than-expected reduction in nickel plate production, the oversupply persists. It is expected that nickel plates will continue to accumulate this week.

Overseas, on December 18, LME nickel inventories increased by 2,664 mt from the previous day, nearly 90% from Rotterdam and the remaining 360 mt from Kaohsiung.

Demand side: On the alloy side, military orders are still stable, while new orders for civilian use show a month-on-month decline. Therefore, it is limited to support the demand for refined nickel. In terms of stainless steel, there was an increase in production of 300 series stainless steel by some major factories, and some companies ramped up their scheduling in December. As a result, compared to October, there is increased support from steel mills for pure nickel. Electroplating orders have been relatively stable since entering the fourth quarter, with no significant growth for the time being. The electroplating orders remained relatively stable since entering Q4, with no significant growth observed so far.

SMM outlook

In terms of fundamentals, the nickel output is expected to increase, and the downstream demand for pure nickel is limited. The future nickel price movement will be subject to how LME nickel inventory changes.