Nickel Futures Prices Surge amid the Potential Production Cuts of NORNICKEL Nickel

SHANGHAI, Dec 22 (SMM) - The US dollar fell again today, offering certain support for the metal futures prices. Nickel inventory is dropping although the demand has remained slack recently. Besides, boosted by the potential production cuts of NORNICKEL nickel in 2023, LME nickel once soared by 6% yesterday and closed up 5.05%. SHFE nickel contract rallied today and once recorded a gain of 3%, closing up by 2.32% in the early trading.
Spots: The average spot price of SMM #1 refined nickel was 227,250 yuan/mt, up 2.46% or 5,450 yuan/mt from December 21.

As of December 21, the average price of SMM Ni 8-12% high-grade NPI was 1,355 yuan/mtu (ex-factory, tax included), flat from the previous trading day. The potential production cuts of NORNICKEL nickel cast a limited impact on the NPI sellers' quotes. NPI plants maintained normal production, and the market still witnessed some spot NPI available. However, since most of the Indonesia NPI have been sold, there are fewer small orders in the market. On the demand side, stainless steel futures prices dipped over 1,500 yuan/mt amid the poor consumption, and steel mills are bearish on the market outlook.
Inventory: As of December 16, nickel stocks in some regions dropped significantly, with a weekly decrease of 2,725 mt. LME nickel inventory dipped 120 mt on December 21 from the previous trading day. Recently, the import window has remained closed, while the export window has opened amid the high LME nickel prices. Some enterprises chose to export due to the slack downstream demand in China and the high nickel prices in overseas markets. In addition, transactions picked up slightly driven by the rebound of LME nickel prices, hence the pure nickel social inventory dropped.
China produced 14,900 mt of refined nickel in November, down 3.11% on the month and 1.91% on the year. The figure was 6.7% lower than that in July 2022. During November, the domestic pandemic eased and the transportation of various smelters returned to normal. However, according to SMM research, a domestic refined nickel plant in north-west China stopped the production due to the maintenance and is expected to resume normal production in 15-30 days. The output may fall by about 500-1,000 mt. The affected output accounts for 3.23%-6.45% of China's total refined nickel output, hence this overhaul has little impact on the supply of domestic refined nickel.

It is expected that the domestic refined nickel output will stand at 15,000 mt in December, up 0.47% on the month but down 0.08% on the year. The output of refined nickel in December will change little from that in November, mainly because the smelters in north-west China have resumed their normal production in mid-December.

Fundamentals: NPI plants maintained normal production, and the market still witnessed some spot NPI available. However, since most of the Indonesia NPI have been sold, there are fewer small orders in the market. On the demand side, stainless steel transactions were sluggish amid the impact of COVID-19 outbreaks. The spot prices stabilised after falling. In the alloy sector, the pure nickel consumption by the alloy companies will fall in the off-season of December. To sum up, the current downstream demand for pure nickel is slack, but the inventory keeps dropping. Nickel prices are expected to move rangebound in the near future affected by the news front.