[SMM Nickel Midday Review] Nickel prices drifted higher on September 22, market sentiment turned warm ahead of the China-US summit

SMM Nickel September 22:

Macro and market news:

(1) President Xi Jinping will pay a state visit to the US from September 23 to 25, marking the first state visit to the US in 11 years and the first mutual visits by the Chinese and US heads of state within half a year. Prior to this, He Lifeng completed economic and trade consultations with Bessent and Greer in New York, with officials describing the talks as "candid, in-depth, and constructive," and a dialogue on AI issues was also held. The central parity rate of the yuan has been raised for nine consecutive days, with the onshore rate closing at 6.6955, the highest since July 2022. The outcome of the meeting has become the biggest variable for global markets this week.

(2) Oil prices slumped as geopolitical premiums receded. Expectations of US-Iran diplomatic engagement heated up (the Iranian president traveled to the US today to attend the UN General Assembly), and Saudi Arabia increased loadings for export through the Strait of Hormuz after rerouting (seven supertankers loaded 14 million barrels on Sunday). Overnight, WTI plunged 4.28% to $91.97/bbl, and Brent fell 3.32% to $95.99; COMEX gold dropped 0.99% to $4,381. However, US retail diesel prices broke through $6.5/gallon to a new high, and the Moscow refinery halted operations after an attack, with Russia planning to extend the diesel export ban, leaving refined product tightness unresolved.

(3) According to SMM, due to the El Niño phenomenon, Indonesia has experienced dry weather, putting local production water supply under pressure and disrupting transportation conditions. NPI production at the IMIP industrial park in Indonesia may be affected in October, though specific production plans have not yet been clarified. Given current market inventory levels, the impact on the overall supply-demand pattern is expected to be limited in the short term.

Spot market:
On September 22, the average price of SMM #1 refined nickel was 126,150 yuan/mt, up 200 yuan/mt from the previous trading day. In terms of spot premiums, the average for Jinchuan #1 refined nickel was 3,850 yuan/mt, down 250 yuan/mt from the previous trading day, while mainstream domestic brands of electrodeposited nickel ranged from 0 to 500 yuan/mt.

Futures market:
The most-traded SHFE nickel contract (2610) drifted higher in morning trading, closing the morning session at 124,400 yuan/mt, up 0.70%.

Short-term outlook:
On the macro front, falling oil prices have eased pressure from rate-hike trading, but Fed officials continue to strike a hawkish tone and expectations of an October rate hike remain; on the fundamental side, water resource disruptions in Indonesia continue to disturb supply expectations, but nickel's own high inventory and weak demand pattern remain unchanged. In the short term, the most-traded SHFE nickel contract is expected to consolidate, with a range of 123,000-126,000 yuan/mt.