[SMM Analysis] Nickel Prices Rebounded Significantly This Week, Domestic Destocking Increased

This week, nickel prices rebounded significantly amid macro tailwinds fueled by rising expectations for US Fed interest rate cuts. The most-traded SHFE nickel contract NI2510 closed at 121,700 yuan/mt on Friday, up 1.75% WoW. LME nickel showed a more pronounced rebound, with its latest quote at $15,370/mt, up 2.6% WoW. Spot market-wise, the average price of SMM #1 refined nickel stood at 122,000 yuan/mt this week, up 1,850 yuan/mt WoW. The average premium for Jinchuan nickel averaged 2,400 yuan/mt this week, down 300 yuan/mt WoW, mainly due to weaker premiums amid higher futures prices and tepid downstream demand. The premium range for mainstream electrodeposited nickel remained at -100-300 yuan/mt this week. Overall spot transactions in August showed little difference from July, maintaining the weak off-season demand pattern.

From a macro perspective, expectations for US Fed interest rate cuts intensified after Fed Governor Christopher Waller called for lowering short-term borrowing costs in the US, signaling support for a rate cut next month and further cuts within the next three to six months to prevent a labor market collapse. The Fed's dovish signals pressured the US dollar, thereby supporting nickel prices. Meanwhile, the CPC Central Committee and the State Council issued guidelines on promoting high-quality urban development, aiming to basically complete the construction of a modern people-centered city by 2035. Long-term infrastructure plans are expected to boost demand for stainless steel and nickel. Overall, the nickel market currently benefits from a favorable macro environment. With the approaching September-October peak season, downstream demand is expected to recover, and spot trading activity is likely to pick up. Nickel prices are projected to fluctuate higher within the range of 120,000-124,000 yuan/mt.

Inventory-wise, Shanghai Bonded Zone stocks stood at around 4,700 mt this week, flat WoW.

Domestic social inventory totaled approximately 39,500 mt, with a weekly destocking of 1,402 mt.