SHFE nickel futures broke down sharply after the National Day holiday amid a dual-weak supply-demand landscape.
Before the holiday, the main SHFE nickel contract settled at CNY 122,040/tonne. While SHFE closed during the break, LME Nickel traded within US $ 15,510–15,965/tonne. Post-holiday, SHFE nickel breached the CNY 120,000 threshold and hit a yearly low. As of Oct 9, it closed at CNY 119,100/tonne, down 2.41% from pre-holiday levels, with obvious downward shift in weekly price centre.
On the macro front: After the Fed's September rate hike, market expectations for a second hike this year kept fluctuating. The Oct and Dec FOMC meetings remain key focus. A stronger US Dollar continues to pressure non-ferrous metals.
Fundamentals: Nickel ore prices softened markedly. Indonesia cut HPM fully for the first half of October. Pyromet ore premiums turned negative for mainstream grades for the first time. Port inventories built up sharply post-holiday, confirming ample ore supply.
NPI (Nickel Pig Iron) negotiation prices slid rapidly; some traders quoted CNY 10,350–10,500 per nickel unit, while steel mills target purchase prices near CNY 10,200 per nickel unit. Wide bid-ask spreads limited concluded deals. Supply inflows rose, and downstream players focused on inventory digestion.
Refined nickel broke below CNY 120,000. Spot premiums/discounts diverged. Buyers only covered rigid demand and trading activity stayed thin. Domestic social inventories climbed to 122,093 tonnes after the holiday.
For nickel intermediates: MHP discount edged down to 85.5%, with cobalt discount further dropping to 56.5% (new cyclical low). High-grade nickel matte discount held steady at 92.5%, relatively resilient.
Cost profile: NPI margins keep compressing, with some Indonesian plants running at a loss. Post-holiday cash cost for MHP fell to around US $15,400 per nickel tonne, and high-grade nickel matte to US $15,000 per nickel tonne. Cost benchmarks moved lower. However, plunging cobalt discounts reduced by-product cobalt revenue, squeezing margins of some HPAL projects.
Overall, nickel prices broke down post holiday. Weak ore prices, abundant NPI supply and falling discounts of nickel intermediates weighed on prices. On the demand side, stainless steel mills prioritised inventory destocking, while battery output schedules were further trimmed. The dual-weak supply-demand pattern remains intact.
As Q4 kicks off, long-term contract negotiations get underway. Market participants are discussing production and import plans for next year, which may bring periodic sentiment and capital impact. We expect SHFE nickel to trade weakly next week within CNY 117,000–121,000/tonne.
Key monitors: Q4 long-term contract talks and macro policy shifts.
