[SMM Analysis] Nickel prices were in the doldrums this week, with domestic inventory increasing slightly.

The most-traded SHFE nickel contract generally moved sideways in a weak pattern this week. It briefly tested the 118,000 yuan/mt level early in the week but failed to sustain a breakout, subsequently pulling back under pressure. Prices largely fluctuated within the 116,000-118,000 yuan/mt range, closing at 117,790 yuan/mt in Friday's night session, up 0.54% WoW, amid sluggish trading activity. LME nickel prices moved largely in sync with SHFE nickel, showing sideways movement, with weekly prices mainly oscillating between $14,700/mt and $14,900/mt. In the spot market, the average price for SMM #1 refined nickel was 120,020 yuan/mt this week, up 550 yuan/mt WoW. The average premium for Jinchuan nickel was 4,900 yuan/mt, up 150 yuan/mt WoW. The premiums and discounts for mainstream domestic electrodeposited nickel ranged from -200 to 400 yuan/mt, with electrodeposited nickel premiums edging lower. Approaching year-end, downstream demand weakened, resulting in mediocre spot transactions this week.

From a macro perspective, market expectations for a US Fed interest rate cut in December significantly strengthened this week, with the probability nearing 90% at one point. Looser liquidity expectations provided underlying support for nickel prices. Progress was made in the Russia-Ukraine conflict, while the DRC and Rwanda formally signed a peace agreement, ending a 30-year conflict and reducing geopolitical risks. LME nickel inventory dipped slightly this week but remained at an absolute high of over 250,000 mt. Nickel prices are expected to continue moving sideways in the short term, with the core fluctuation range for the most-traded SHFE nickel contract projected at 114,000-118,000 yuan/mt.

Inventory side, Shanghai Bonded Zone inventory stood at around 2,200 mt this week, flat WoW.

Domestic social inventory was approximately 57,000 mt, with a buildup of 1,499 mt WoW.