Fed Hikes Rates, Nickel Prices Rebound as Market Factors Stabilize

Nickel prices fell before rebounding this week, with the most-traded 2610 contract dipping to a weekly low of 120,000 yuan/mt before rebounding for two consecutive days, ending the week down about 2,290 yuan/mt, or roughly 1.8%. The LME nickel 3M contract also bottomed out over the week, last closing at $16,265/mt, down about $400/mt WoW, or roughly 2.4%. In the spot market, the SMM #1 refined nickel weekly average price was about 125,100 yuan/mt, down about 1,850 yuan/mt WoW. Jinchuan refined nickel premiums extended a one-way widening trend, rising from about 2,800 yuan/mt on Monday to above 4,300 yuan/mt by Friday, highlighting structural tightness in spot supply. The mainstream electrodeposited nickel premium range strengthened from -100-500 yuan/mt to 0-500 yuan/mt over the week. Spot trading was relatively active, with downstream users buying aggressively at low prices and restocking noticeably picking up.

On the macro front, the key event this week was the US Fed's September FOMC meeting. US August CPI released earlier in the week rose 3.4% YoY, with the MoM increase widening from 0.1% to 0.4%, and core CPI rose 0.3% MoM, the largest gain since April. Combined with August nonfarm payrolls adding 162,000 jobs and the unemployment rate holding at 4.1%, the pickup in inflation and labor market strength fully cleared the path for a rate hike. On September 16, the US Fed voted unanimously 12-0 to raise rates by 25bp, lifting the federal funds rate target range to 3.75%-4.00%, the first hike since July 2023. In China, August economic data signaled steady growth, the central bank maintained ample liquidity, and policies to expand domestic demand and support enterprises were rolled out intensively.

At the industry level, the Ministry of Energy and Mineral Resources revised the HPM benchmark price formula for nickel ore for the second time (the nickel correction coefficient for 1.2% low-grade limonite ore was lowered from 26% to 14%, and cobalt payables were cut from 30% to 17%, effective September 15). SMM calculates the new HPM for 1.2% nickel ore at $24.89/wmt, notably below the current actual delivered price of $27, with limited impact on actual HPAL procurement costs. APNI has called for monitoring the impact of the new formula. Eramet's PT Weda Bay Nickel officially resumed mining after four months of maintenance, indirectly confirming that supplementary quotas have been granted. Meanwhile, the impact of the El Niño drought has emerged, with Nickel Industries suspending the capacity ramp-up at its Excelsior Nickel Cobalt project in Sulawesi (maintaining only about 30% of designed capacity).

On the inventory front, Shanghai Bonded Zone inventory this week was about 1,900 mt, flat WoW. China's social inventory was about 125,000 mt, destocking by about 3,000 mt WoW.

Nickel prices currently sit at the intersection of "macro pressure easing after the rate hike" and "declining domestic refined nickel production and imports, continuous social inventory drawdowns, and structurally strengthening spot premiums." Downside is supported by costs and spot fundamentals, while upside is capped by US dollar strength and high inventories. The most-traded SHFE nickel 2610 contract is expected to trade in a core range of 120,000-126,000 yuan/mt next week.