[SMM Analysis] Nickel Prices Trended Lower Unilaterally This Week, with Weekly Inventory Declining Slightly

Nickel prices trended lower unilaterally this week, as the most-traded SHFE nickel contract broke through key support levels successively, while LME nickel prices also weakened. The core driver for the price decline was the intensification of the supply-demand imbalance in nickel, with inventory climbing to a near five-year high, while reduced expectations for interest rate cuts from a macro perspective further dampened market sentiment. The most-traded SHFE nickel contract broke the consolidation range that had persisted for nearly four months, falling all the way from 121,000 yuan/mt to close at 114,050 yuan/mt on Friday, breaking below the June low, with a weekly decline of 3.21%. LME nickel prices also performed weakly, dropping from $14,870/mt to below $14,400/mt, with the latest 3M nickel closing at $14,380/mt, down 3.36% WoW. In the spot market, the average price of SMM #1 refined nickel this week was 116,630 yuan/mt, down 2,900 yuan/mt WoW. The average premium for Jinchuan nickel this week was 4,000 yuan/mt, up 300 yuan/mt WoW, while the premiums and discounts for mainstream domestic brands of electrodeposited nickel ranged from 0-500 yuan/mt. This week, affected by refined nickel smelters switching production to nickel sulphate, the volume of nickel plate available for external sales decreased, leading to a decline in spot circulation volume and a strengthening of premiums.

From a macro perspective, the US September non-farm payrolls data this week showed a contradictory combination of "strong job growth" and "an unemployment rate climbing to 4.4%", significantly reducing market expectations for US Fed interest rate cuts. Concurrently, internal Fed concerns about inflation led to hawkish rhetoric, causing confusion in market expectations regarding the future pace of rate cuts and a significant rise in risk-off sentiment. The US dollar index remained strong, briefly breaking through the 100 level to hit a six-month high, exerting macro-level pressure on nickel prices. In the short term, after consecutive declines, nickel prices are showing signs of being oversold. With expectations for refined nickel production cuts, the recent pace of inventory accumulation is expected to slow, potentially providing room for a staged rebound. However, dominated by the surplus logic, nickel prices are unlikely to achieve a genuine trend reversal; prices are expected to continue fluctuating and bottoming out, with the most-traded SHFE nickel contract projected to trade in the range of 114,000-118,000 yuan/mt.

Inventory side, Shanghai Bonded Zone inventory stood at about 2,400 mt this week, flat WoW.

Domestic social inventory was about 52,000 mt, with a destocking of 855 mt WoW.