Last week, nickel prices saw a surge followed by a decline. According to the SunSirs commodity market analysis system, spot electrolytic nickel was quoted at 121,850 RMB/ton on August 15th, a weekly increase of 0.58%, but still down 5.40% year-on-year. Initially driven by positive macroeconomic factors (rising expectations of a Federal Reserve rate cut and the temporary suspension of US-China tariffs), nickel prices surged, but subsequently retreated due to high inventories and weak stainless steel demand, maintaining an overall volatile trading pattern.

In terms of market transactions, after the price decline, demand for essential goods increased. Traders reported that some downstream companies were scouting for bargains, but the overall market remained cautious, and the sustainability of this trend remains to be seen.

Macroeconomic Outlook: Expectations of easing support the market, but policy uncertainty remains.

Expectations of a Federal Reserve rate cut have strengthened: The US Consumer Price Index (CPI) rose 2.7% year-on-year in July, below the expected 2.8%. The market's probability of a September rate cut has risen to 94%, and the US dollar index has retreated to around 98, supporting metal prices.

Sino-US trade frictions have temporarily eased: Both sides have agreed to suspend the 24% tariff increase for 90 days, alleviating market concerns. However, the 10% base tariff remains in place, leaving further uncertainties in subsequent negotiations.

Geopolitical tensions have eased: The US and Russian presidents met to discuss a ceasefire in Ukraine, easing market risk aversion. However, Zelensky rejected a "territorial swap," and further progress remains to be seen.

Domestic industrial demand remains stable: In July, the added value of industrial enterprises above designated size increased by 5.7% year-on-year and 0.38% month-on-month, indicating stable manufacturing demand, but the direct boost to nickel prices is limited.

Macro Summary: Expectations of short-term liquidity easing support nickel prices, but high inventories and weak demand limit the extent of any rebound. The market still awaits clearer policy signals.

Supply Side: Inventory pressure remains high, and ore prices are diverging.

Nickel Ore Supply: Indonesian nickel ore prices remain stable (1.8% Ni FOB $78/wet ton), and supply is stable. Low-grade nickel ore prices in the Philippines continued to decline (0.9%Ni CIF at $42/wet ton, down 2.3% week-on-week), primarily due to the end of the rainy season and increased shipments.

Inventory pressure remains: LME nickel inventories decreased by 570 tons week-on-week to 211,662 tons. Shanghai nickel inventories increased by 1,520 tons week-on-week to 22,141 tons, but remain generally high.

Smelting profits are under pressure: Nickel pig iron (NPI) production margins have fallen to 3.2%. Some companies have reduced production, but this has not yet significantly constrained the supply side.

Demand: Stainless steel is recovering weakly, and the growth rate of new energy is slowing.

Stainless steel demand: August production was scheduled to be 3.3041 million tons, a 2.29% increase month-on-month and a 1.64% decrease year-on-year, indicating a transition from off-season to peak season. However, destocking is slow, and market transactions are mediocre. On August 15, the benchmark price of stainless steel on SunSirs was 12,264.29 RMB/ton, up 1.42% week-on-week, but end-user purchases remain cautious.

New Energy Demand: Ternary precursor production increased by 5.71% month-over-month in July, but growth is expected to slow to 5.4% in August due to the digestion of backlog orders. Ternary material production increased by 5.75% month-over-month in July, but growth is expected to slow to 3.07% in August, indicating a marginal slowdown in demand growth. Regarding spot purchases, when prices fell below 121,000 RMB/ton, demand for essential goods increased, but the overall market remained focused on destocking, raising questions about the sustainability of this trend.

Market Outlook:

Expectations of a Federal Reserve rate cut and progress in Sino-US trade relations are expected to support nickel prices, potentially leading to a slight upward trend due to liquidity. However, geopolitical uncertainty and high inventory pressures are expected to constrain price increases. Nickel prices are expected to remain volatile.

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