Nickel: Initial production cuts emerge and quota-cut rumors ferment; futures bottom out and stage a strong rebound
The most-traded SHFE nickel contract staged a strong "bottoming-out and rebound" last week, trading in the range of Yuan 114,250-123,600/tonne before closing at Yuan 122,740/t on Friday. On the macro side, although the overall bearish macro environment has not fundamentally reversed, market sentiment warmed somewhat on a phased basis; combined with production cuts at some supply-side projects--previously the subject of sustained speculation--beginning to materialize, short funds concentrated on profit-taking and exiting, while longs seized the opportunity to launch a counterattack. After hitting a year-to-date low of Yuan 114,250/t early in the week, the futures market rallied rapidly and strongly regained the Yuan 120,000 integer mark, significantly repairing market pessimism.
Across the fundamentals, all varieties rebounded in tandem, boosted by sentiment. For nickel ore, prices had been persistently probing lower and ran under overall pressure; however, market rumors that Indonesia's 2027 RKAB quota will be further cut gave rise to expectations of tighter forward supply. For NPI, with production cuts at some projects materializing and futures rallying, steel mills' sentiment to press prices eased somewhat, and the high-grade NPI transaction center stabilized and tentatively edged up. For intermediates, payables for MHP and high-grade nickel matte stopped falling amid expectations that some production cuts are beginning to materialize; the supply contraction logic began to dominate, and holders' sentiment to hold prices strengthened. For refined nickel, the sharp futures rebound drove adjustments in spot premiums/discounts; previously suppressed downstream rigid demand was released to some extent in the latter half of the week, trading sentiment warmed marginally, and the pressure from accumulating domestic social inventories eased slightly.
Overall, although the bearish macro pattern has not yet reversed, production cuts at some supply-side projects beginning to materialize, together with rumors of forward quota cuts, injected a shot in the arm into the market, and funds' sentiment was released in a concentrated manner. However, it should be noted that the substantive improvement in the supply-demand balance from the current scale of production cuts still needs time to be verified, and global visible inventories remain high; the short-term rebound is more a correction of prior excessive bearish sentiment. The most-traded SHFE nickel contract is expected to maintain a firm rangebound trend next week, with a temporary range of Yuan 120,000-125,000/tonne. Going forward, key focus areas include verification of actual production cut execution data, the final implementation of Indonesia's RKAB policy, and marginal changes in downstream stainless steel and new energy production schedules.
