LME nickel prices witness mild upside as dollar softens

• Macro cues drive nickel’s mild weekly rebound
• Oversupply and weak demand limit upside potential

LME nickel prices edged higher this week supported primarily by macro cues rather than any shift in fundamentals. The benchmark three-month contract closed at $14,920/t on 5 December, slightly up from $14,880/t last week. Daily movements reflected similar sentiment: on 3 December, futures gained $73/t, followed by a $24/t rise on 4 December. Spot prices edged modestly higher as well. LME inventories moved in a mixed pattern – declining for four consecutive sessions before a small build of 126 t, ending the week at 253,116 t, still lower than 254,760 t a week earlier.

Macro drivers take the lead

The mild price improvement was largely driven by macroeconomic developments. US initial jobless claims dropped to their lowest level in more than three years, reducing labour market worries and reinforcing expectations for a Federal Reserve rate cut next week. This pressured the US dollar, making commodities relatively more attractive and supporting a small rebound in nickel. Weak US nonfarm payroll data earlier in the week also boosted rate-cut bets, adding to the metal’s upward momentum.

Supply-side conditions stay loose

Despite the slight gains, the physical market remains oversupplied. Indonesian nickel ore prices declined this week, with benchmark laterite ore prices falling 2.21% while premiums stayed stable. Seasonal heavy rainfall in Sulawesi disrupted some mining activity, but the impact on overall supply remains limited due to ample inventories and delayed RKAB approvals. NPI prices showed signs of stabilisation as smelters resisted selling below cost, yet stainless steel mills maintained low procurement interest, keeping fundamentals soft. China’s NPI output also registered a sharp m-o-m decline in November, reflecting weak end-use demand.

Outlook

Nickel is expected to stay range-bound in the near term, with movements driven mainly by macro cues: USD direction, US labour data, and Fed expectations while fundamentals continue to cap strong upside.