[SMM Analysis] Nickel Prices Fall This Week Amid Steadily Climbing Inventory

This week, the center of nickel prices moved lower WoW, with the most-traded SHFE nickel contract fluctuating within 132,000-140,000 yuan/mt. Early in the week, it fell below the 135,000 yuan mark amid weaker macro sentiment, but in the latter part of the week, rumors of maintenance at HPAL projects provided strong support around 133,000 yuan, and prices eventually returned to fluctuate around 137,000 yuan/mt. As of Friday's close, the most-traded SHFE nickel contract rose 0.14% WoW, while LME nickel gained 0.06% WoW. In the spot market, the average SMM #1 refined nickel price was 140,510 yuan/mt this week, up 850 yuan/mt WoW. The average premium for Jinchuan nickel was 6,800 yuan/mt this week, down 100 yuan/mt WoW, while premiums for mainstream electrodeposited nickel brands in China ranged from -300 to 400 yuan/mt. Overall spot transactions were mediocre this week.

On the macro front, geopolitical risks escalated markedly this week. In his first statement after taking office, Iran's new supreme leader said the Strait of Hormuz would remain closed and that a new front would be opened if necessary. US ADP employment increased by 63,000 in February, above market expectations. As a result, the US dollar index strengthened, putting pressure on non-ferrous metal prices. Pan Gongsheng, governor of China's central bank, said the next step would be to build a scientific and prudent monetary policy framework, continue to effectively implement a moderately accommodative monetary policy, and strengthen counter-cyclical and cross-cyclical adjustments.

Inventory side, inventory in the Shanghai Bonded Zone was about 2,200 mt this week, flat WoW. China's social inventory was about 87,000 mt, with an inventory buildup of about 3,000 mt WoW.

In Indonesia's Morowali region, some HPAL plants cut production due to tailings accidents. Meanwhile, tensions in the Middle East raised the risk of sulfur supply disruptions, and the market expected future MHP intermediate product supply to be tight, with strong willingness to hold prices firm, which would provide some cost support for nickel prices. However, the area above 140,000 yuan/mt still faced strong resistance from high inventory and weak demand. The core trading range for the most-traded SHFE nickel contract next week is expected to be 135,000-145,000 yuan/mt.