On July 15th, nickel prices reversed course from the previous day's gains and turned lower. The spot price for 1# nickel on the Yangtze River market fell by 400 yuan. With nickel sulfate prices moving sideways and stainless steel demand remaining limited, the quality of the prior day's recovery is now being reassessed. Demand is emerging as the critical variable determining the depth of this current pullback.

Stainless Steel's Supportive Role

Stainless steel represents the fundamental demand base for nickel, accounting for over 70% of consumption. The average spot price for 1# nickel on the Yangtze River was quoted at 129,650 yuan per tonne, a decline of 400 yuan per tonne from the previous day. There has been no concentrated surge in end-user orders, with downstream buyers primarily purchasing based on immediate needs, indicating a cautious and limited capacity to absorb supply.

If stainless steel production schedules remain at high levels, raw material restocking could place a floor under price declines. However, if demand from the real estate and infrastructure sectors remains weak and consumption fails to exceed expectations, the current correction may persist.

Battery Nickel's Divergence

The average price for battery-grade nickel sulfate held steady at 33,100 yuan per tonne, unchanged from yesterday, showing neither a decline nor a rise in tandem with other nickel prices. The new energy supply chain is in its traditional off-season, with cathode material producers showing little willingness to build inventories. Demand for battery nickel lacks elasticity and is insufficient to provide a solid foundation for overall nickel prices.

The average price for nickel chloride also remained flat at 39,300 yuan per tonne. The stalemate in battery nickel prices indicates that pricing is currently driven by supply disruptions and capital flows rather than genuine consumption. With real demand not keeping pace, the structural divergence on the demand side is becoming increasingly pronounced, making it difficult for this segment to act as an engine for price increases.

Inventory Overhang Concerns

According to a report from July 14th, nickel inventories on the Shanghai Futures Exchange decreased by 2,525 tonnes week-over-week to 99,097 tonnes. While this destocking provides some support for prices, the absolute volume of nearly 100,000 tonnes remains elevated. A meaningful reduction in this inventory requires a genuine improvement in consumption, not merely market expectations.

With the price differential between domestic and international markets narrowing, the arrival schedule of imported material will influence the pace of domestic inventory drawdowns. If demand continues to be tepid, the speed of inventory reduction is likely to slow.

The key question is whether the current nickel price correction is merely a pause within a broader uptrend or a precursor to a demand-driven downturn. If both stainless steel and battery nickel sectors see a simultaneous surge in demand, the downside for prices may be limited. Market attention will subsequently focus on signals of downstream restocking and end-user orders, with the validation of demand strength remaining the greatest uncertainty.