Last week, the SHFE nickel main contract traded in a range of Yuan 120,270–125,780/tonne, closing at Yuan 120,270–125,780/tonne, closing at Yuan 124,090/tonne on Friday. During the week, nickel first weakened and then rebounded, at one point breaking below Yuan 121,000/tonne.
The Fed hiked rates by 25 basis points as expected. Ahead of the meeting, risk aversion and bearish sentiment were concentrated, pressuring the entire base metals complex and pushing nickel down to around Yuan 120,000/tonne. Once the meeting was out of the way, bearish factors were gradually priced in, sentiment recovered, and nickel bounced from its lows --though the broader picture remained weak.
On the fundamentals side, the nickel ore market showed a split: Philippine ore held steady, while Indonesian supply increased. Domestic ferroalloy plants started pre-stocking, but Indonesian RKAB supplementary quotas were gradually implemented, adding to ore supply pressure. Nickel ore inventories at Chinese ports rose noticeably during the week.
In NPI, steel mills kept pressing prices. Transaction prices fell further to around Yuan 1,040/mtu during the week, with loose supply and weak downstream demand still weighing on the market.
Refined nickel prices first fell and then rebounded, with spot premiums/discounts broadly strengthening. But downstream buying remained mostly hand-to-mouth, and transaction improvement was limited. Domestic refined nickel inventories continued to destock, and global visible inventories also declined, easing inventory pressure at the margin.
In nickel intermediates, the MHP nickel discount fell further to 88%, while the cobalt discount remained low. Low-priced deals continued amid weak demand. The ENC HPAL project was again constrained by drought-related water supply restrictions, slowing its capacity ramp-up and delaying expected supply releases.
Cost support from nickel ore and NPI weakened. Domestic NPI spot profit margins fell to low levels, and some Indonesian plants are already loss-making. For MHP, although lower nickel prices and raw material prices brought cash costs down, the continued decline in cobalt discounts squeezed by-product revenue, pushing cobalt-adjusted costs higher and marginally strengthening cost-side support.
Nickel recovered somewhat after macro headwinds were concentrated last week, but the supply pressure and weak end-use demand pattern have not changed. The sentiment recovery after macro bearishness was priced in may provide temporary support, but fundamentals still lack clear improvement. Supply-side pressure and weak demand continue to limit upside.
Next week, SHFE nickel is expected to remain range-bound with a weak bias, with a temporary range of Yuan 121,000–126,000/tonne.
Key things to watch:
Post-Fed market sentiment
Indonesian nickel ore supply and prices
Stainless steel end-use demand
MHP cobalt discount trends
