SHFE Nickel Prices Fell for Two Consecutive Days amid Growing Pure Nickel Supply and Macroeconomic Pessimism

SHANGHAI, Jan 5 - Prices of most SHFE base metals fell today. SHFE nickel prices extended losses amid growing nickel matte supply from Tsingshan Group and increasing expectations over an interest rate hike by the Federal Reserve. SHFE nickel prices dropped from 234,870 yuan/mt, the highest since April 25, 2022 hit on January 3. As of the closing of the daytime trading today, SHFE nickel prices plummeted 5.19%. LME nickel prices closed with losses of 1.91% yesterday evening.

Spot prices of SMM #1 refined nickel have edged up since December, with the average price jumping over 20,000 yuan/mt or over 10% as of January 5. The average price stood at 229,850 yuan/mt on January 5, down 3.69% from the previous day.

While overseas nickel inventories climbed recently, domestic inventories declined. Domestic pure nickel stocks have continued to decline since December 9, 2022, falling by nearly 3,000 mt as of December 30.

According to SMM survey, most manufacturers are currently maintaining normal production of pure nickel, and therefore some companies still need to restock.

LME nickel inventories, on the other hand, have surged since late November 2022, and continued to grow after a brief decline on December 7-8. As of January 4, LME nickel inventories increased by nearly 5,700 mt from a low on November 1, 2022.

The import losses of NORNICKEL nickel continued to expand amid high LME nickel prices. The previous transactions of NPI were brisk. Domestic NPI plants have stepped up output cuts in December. SMM data showed that NPI output in December 2022 fell 1,940 mt from November. Meanwhile, Indonesian nickel has mostly been booked. As such, spot cargoes available are scarce.

Domestic refined nickel output has been falling since July 2022 when the output hit the highest since 2018. The output fell 1,000 mt as of December.

On the demand side, rising futures prices and market optimism over consumption after CNY holidays bolstered spot stainless steel prices marginally in Wuxi and Foshan on January 4. Some alloy plants are expected to restock for CNY holidays.

The higher output at new pure nickel plants and improved shipments from old refined nickel smelters have eased supply tightness. The market is optimistic over the consumption after CNY holidays. The market shall pay attention to the impact on nickel prices from macroeconomic front. SMM expects nickel prices to remain weak in the near term.