Nickel Price Fluctuations: Understanding Market Oscillations Around the 120,000 Yuan/Mt Threshold
In recent weeks, nickel prices and macro factors have been oscillating around the pivotal 120,000 yuan/mt threshold, creating both challenges and opportunities for market participants. This price level has emerged as a critical technical and psychological barrier, with price action consistently gravitating toward this benchmark despite various macroeconomic pressures.
Recent Price Performance and Key Thresholds
The SHFE nickel contract (NI2508) closed at 120,500 yuan/mt, registering a weekly decline of 0.57%. Market volatility was evident throughout the week, with prices touching a low of 119,270 yuan/mt before rebounding to a high of 121,670 yuan/mt.
"Influenced by Trump tariff effects and a stronger US dollar, the most-traded SHFE nickel contract opened lower at the beginning of the week," notes Shanghai Metal Market (SMM) in their July 18, 2025 analysis. "Mid-week, macro sentiment improved, and short covering pushed the contract price to rebound significantly."
In the spot market, the SMM 1# refined nickel average price stood at 121,240 yuan/mt, representing a modest increase of 40 yuan/mt from the previous week. Premium variations were observed across different nickel products:
- Jinchuan nickel commanded a premium of 1,900-2,100 yuan/mt, showing a slight weekly decrease of 10 yuan/mt
- Electrodeposited nickel premiums remained stable at -100-300 yuan/mt
The LME nickel price showed correlation with SHFE movements, declining to $15,065/mt at the week's start before recovering alongside its Chinese counterpart. This synchronization highlights the interconnected nature of global nickel markets despite regional supply-demand dynamics.
Macroeconomic Influences on Nickel Markets
Macroeconomic factors have taken center stage in driving nickel price movements, overshadowing industry-specific fundamentals in recent trading sessions.
The announcement of potential tariffs has created significant market uncertainty. Former President Trump announced plans to implement tariffs ranging from 25% to 40% on over 150 countries (including Japan) starting August 1, 2025. This announcement triggered immediate downward pressure on metal prices broadly, with nickel particularly vulnerable due to its global supply chain dependencies.
US inflation data further complicated the market outlook. June CPI figures showed an overall annual rate of 2.7%—the highest since February—while core CPI reached 2.9%, also a four-month high. These inflationary pressures directly impacted interest rate expectations:
- Probability of a Federal Reserve rate cut in September decreased from 65% to 58%
- Likelihood of two cuts in 2025 fell from 93% to 76%
The strengthening US dollar, partly in response to these shifting monetary policy expectations, created additional headwinds for nickel prices. As a dollar-denominated commodity, nickel typically shows inverse correlation to dollar strength, with a rising dollar making the metal more expensive for holders of other currencies.
"Currently, macro factors still dominate the direction of nickel prices," emphasizes SMM in their market analysis. "Due to uncertainties in external tariffs and geopolitics, there is a risk of a downward shift in the price center."
How Are Inventory Levels Affecting Market Sentiment?
Inventory metrics provide critical insights into supply-demand balances, often serving as leading indicators for price movements. Recent inventory data shows mixed signals across different warehousing regions.
Global Inventory Tracking and Analysis
Shanghai Bonded Zone inventory registered at 4,700 metric tons, showing a week-over-week decrease of 300 metric tons. This destocking in bonded warehouses could typically signal strengthening demand or strategic repositioning by traders anticipating price movements.
Conversely, domestic social inventory increased to 40,300 metric tons, rising by 1,165 metric tons compared to the previous week. This buildup suggests either softening downstream demand or increased production finding its way to warehouse facilities.
The contrasting inventory movements between bonded and domestic warehouses create an interesting market dynamic. The destocking in bonded zones may indicate import optimization strategies, while domestic inventory accumulation could reflect cautious purchasing behavior by end users wary of macroeconomic uncertainties.
Historically, inventory shifts of this magnitude have preceded price corrections, though the current ratio of inventory-to-consumption remains below five-year averages, providing some fundamental support for prices.
Supply Chain Dynamics
While specific production figures weren't disclosed in recent reports, supply chain indicators suggest normal operating rates across major nickel-producing regions. Processing capacity utilization appears to be maintaining steady output despite economic uncertainties.
Import/export flows have been impacted by the looming threat of tariffs, with some market participants accelerating shipments to beat the August 1 implementation deadline. This time-sensitive logistics adjustment could temporarily distort regional availability metrics and contribute to the observed inventory fluctuations.
The divergence between bonded and domestic inventory levels suggests potential bottlenecks in the distribution chain, possibly related to financing costs, shipping constraints, or strategic positioning ahead of anticipated trade policy changes.
What Technical Indicators Are Signaling for Nickel Prices?
Technical analysis provides valuable context for understanding price movements beyond fundamental factors, with several key indicators offering insights into potential future trajectories.
Price Support and Resistance Levels
The 120,000 yuan/mt price level has established itself as a critical technical threshold, functioning as both support during downtrends and resistance during uptrends. Recent price action demonstrates the magnetic effect of this level, with prices consistently returning to this benchmark despite intraweek volatility.
Immediate support exists at the weekly low of 119,270 yuan/mt, coinciding with the lower boundary of the core reference range at 118,000 yuan/mt. Similarly, resistance appears at the weekly high of 121,670 yuan/mt, with the upper boundary of the reference range at 123,000 yuan/mt creating a ceiling for near-term price appreciation.
Trading volumes have typically increased when prices approach these boundary levels, indicating heightened market interest and potential reversal points. The mid-week price recovery following the approach to the lower support level demonstrates the technical significance of these boundaries.
Market Sentiment Metrics
The short-covering rally observed mid-week reveals important sentiment dynamics. Initial bearish positioning driven by tariff concerns gave way to profit-taking and position adjustment as prices held above key support levels.
The trading range of approximately 2,400 yuan/mt (between weekly high and low) represents about 2% of the contract value, indicating moderate volatility consistent with a consolidating market. This condensed trading range suggests market participants are awaiting additional catalysts before establishing stronger directional conviction.
Open interest patterns across futures contracts have shown stabilization following the price rebound, indicating balanced participation between buyers and sellers at current levels. This equilibrium typically precedes either continuation of the range-bound trading or a decisive breakout once new fundamental information emerges.
How Might Geopolitical Developments Impact Nickel Markets?
Geopolitical factors have emerged as primary market movers, creating both immediate price reactions and longer-term structural considerations for nickel supply chains.
Trade Policy Implications
The proposed tariff structure announced by Trump represents a significant shift in global trade dynamics. With tariffs ranging from 25% to 40% on imports from over 150 countries starting August 1, 2025, the implementation timeline creates immediate market uncertainty.
Historical precedent from similar trade actions suggests metal markets typically experience a three-phase response:
- Initial shock selling (observed in the Monday price decline)
- Stabilization as market participants assess actual impact (the mid-week recovery)
- Structural realignment as supply chains adjust to new economic realities (yet to unfold)
The nickel supply chain shows particular vulnerability to these trade actions given its geographical concentration. Indonesia, Russia, and the Philippines—all potentially affected by the proposed tariffs—collectively account for a significant portion of global nickel production.
Potential retaliatory measures from affected countries could further complicate market dynamics, creating additional trade flow disruptions and price volatility. The US-China trade war impact suggests countries targeted by tariffs typically respond with counteractions within 30-60 days of implementation.
Regional Production Concerns
Political stability in key nickel-producing nations remains a background concern for market participants. Indonesian nickel challenges and evolving regulatory framework around raw material exports continues to influence global supply expectations, while labor market dynamics in Philippines mining regions add another layer of uncertainty.
Environmental regulation changes affecting production have accelerated in recent years, with more stringent emissions standards and sustainability requirements increasing compliance costs for producers. These regulatory trends are expected to continue regardless of short-term trade policy disruptions.
Infrastructure development affecting supply logistics, particularly in emerging production regions, creates additional variables for market participants to monitor. Port capacity constraints, energy availability, and transportation networks all influence the ability of producers to respond to price signals.
What Is the Outlook for Nickel Prices in the Near Term?
The confluence of technical, fundamental, and macroeconomic factors suggests a nuanced outlook for nickel prices and macro factors in the coming weeks.
Price Forecast Scenarios
The core reference range of 118,000-123,000 yuan/mt provides the most probable trading band for the near term, with several scenarios possible:
Bullish case drivers would include:
- Resolution or moderation of tariff proposals
- Weaker than expected inflation data leading to more dovish Fed stance
- Acceleration in destocking trends across both bonded and domestic inventories
- Renewed downstream demand from stainless steel or battery sectors
Under these conditions, prices could test the upper boundary of the reference range, with potential extension toward 125,000 yuan/mt if multiple positive catalysts align.
Bearish case factors include:
- Implementation of full tariff schedule without modifications
- Continued inventory builds suggesting demand weakness
- Further USD strengthening
- Additional monetary policy tightening
This scenario could see prices test the lower support boundary, with risk of decline toward 115,000 yuan/mt if sentiment deteriorates significantly.
The most probable trajectory remains range-bound trading centered around the 120,000 yuan/mt threshold, with technical factors dominating short-term price action while macro developments determine the medium-term direction.
Industry-Specific Demand Factors
Stainless steel production continues to represent the dominant demand driver for nickel, accounting for approximately 70% of global consumption. Production trends, particularly in China as the world's largest producer, provide essential context for price expectations.
Electric vehicle battery manufacturing represents a growing segment of nickel demand, with high-nickel cathode chemistries gaining market share. This sector's expansion trajectory remains positive despite near-term economic uncertainties, providing structural support for nickel consumption.
Aerospace, defense, and specialized industrial applications contribute smaller but stable demand components to the overall market balance. These sectors typically demonstrate less sensitivity to short-term price fluctuations, providing a baseline of consumption regardless of market conditions.
Energy storage applications beyond EVs are emerging as an additional growth vector, though from a smaller base. Grid-scale battery installations using nickel-containing chemistries represent a developing market segment worth monitoring for long-term demand implications. The ongoing mining industry evolution is creating new opportunities for nickel producers to participate in these emerging markets.
FAQ About Nickel Market Dynamics
How do nickel prices typically respond to interest rate expectations?
Interest rate expectations influence nickel prices through multiple channels, including financing costs for producers, currency valuation effects on international trade, and overall economic growth projections that drive industrial demand. Historically, periods of declining interest rates have often corresponded with strengthening nickel prices as economic stimulus measures boost industrial activity.
What is the significance of the 120,000 yuan/mt price level?
The 120,000 yuan/mt threshold represents a psychological and technical inflection point where significant trading volume has historically accumulated. This price level often acts as both support during downtrends and resistance during uptrends, making it a key reference point for market participants when establishing positions.
How do inventory levels correlate with price movements in the nickel market?
Inventory levels typically demonstrate an inverse relationship with nickel prices, though with varying lag periods. Declining inventories generally signal tightening supply conditions that support higher prices, while inventory builds often precede price weakness. However, this relationship can be complicated by factors such as strategic stockpiling and changes in reporting methodologies.
What impact do stainless steel production trends have on nickel demand?
Stainless steel production remains the dominant demand driver for nickel, consuming approximately 70% of global nickel output. Production trends in this sector, particularly in China as the world's largest producer, serve as leading indicators for nickel price movements. Capacity utilization rates, order books, and profit margins in stainless steel manufacturing provide valuable insights into future nickel demand patterns, which in turn influence copper price predictions and other related metals.
Disclaimer: The analysis and forecasts presented in this article are based on current market conditions and publicly available information. Future price movements are subject to numerous uncertainties and may be influenced by factors not covered in this analysis. Readers should conduct their own research and consider their individual risk tolerance before making investment decisions.
| Nickel Market Indicators (July 2025) | Value | Weekly Change |
|---|---|---|
| SHFE Nickel Contract (NI2508) Close | ¥120,500/mt | -0.57% |
| SHFE Nickel Contract Weekly Low | ¥119,270/mt | – |
| SHFE Nickel Contract Weekly High | ¥121,670/mt | – |
| LME Nickel Price Low | $15,065/mt | – |
| SMM 1# Refined Nickel Average Price | ¥121,240/mt | +¥40/mt |
| Jinchuan Nickel Premium | ¥1,900-2,100/mt | -¥10/mt |
| Electrodeposited Nickel Premium | -¥100-300/mt | Unchanged |
| Shanghai Bonded Zone Inventory | 4,700 mt | -300 mt |
| Domestic Social Inventory | 40,300 mt | +1,165 mt |
| Core Price Reference Range | ¥118,000-123,000/mt | – |
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