China Securities Co., Ltd.: Cost support and supply disruption factors; nickel prices show relative strength with a slight upward movement.

China Securities Co., Ltd. released a research report stating that due to cost support and supply disruption factors, nickel prices have shown relatively strong performance recently. On the supply side, due to the El Nio-induced drought in Indonesia, RKEF nickel pig iron plants in the IMIP park began production cuts because of tight water supply for production, with operating loads reduced by about 30%-40% compared with before. If this persists for half a month, it is expected to affect high-grade nickel pig iron output by about 50,000-70,000 physical tons, equivalent to about 5,500-7,700 nickel tons. On the consumption side, the "Golden September and Silver October" peak season has arrived, demand has been revised upward at the margin, and pre-holiday stocking is supporting shipments. Domestic refined nickel continues to destock, with both SHFE and social nickel inventories declining. The main views of China Securities Co., Ltd. are as follows: Lithium: According to Baiinfo, the average market price of industrial-grade lithium carbonate this week was 130,000 yuan/ton, up 3.2% from last week; the average price of battery-grade lithium carbonate was 133,000 yuan/ton, up 3.1% from last week. On the supply side, lithium carbonate output this week is expected to maintain a slight growth trend. The production capacity of lithium salt plants that underwent maintenance earlier continues to recover, production line operations are stable, and the long-term agreement shipment pace of lithium salt plants is steady. As prices recover, some lithium salt plants have increased their willingness to sell spot orders. In addition, Zimbabwe lithium concentrate continues to arrive at ports, supplementing domestic spodumene raw materials, and industry supply is growing steadily. On inventories, the industry continued its destocking trend this week. Lithium salt plants maintained long-term agreement deliveries, spot inventories remained at low levels, term traders showed relatively active restocking sentiment during the week, and downstream material plants continued their strategy of buying on dips. Futures warehouse receipts were destocked significantly, with the previous trading day's futures warehouse receipt volume at 35,858 tons. On the demand side, market demand this week was relatively flat, and downstream purchasing pace slowed somewhat. Because cathode materials and downstream battery plants had not previously stocked up ahead of the dual festivals, raw material inventories were relatively sufficient in the short term, and companies mostly maintained buying on dips. However, demand from the energy storage sector continued to improve, and the operating rate of lithium iron phosphate enterprises remained high, continuing to support lithium carbonate demand; ternary battery producers were reported to have cut orders, with this month's production schedule declining month on month. According to a Baiinfo survey of a sample of 27 battery enterprises, China's total battery production schedule in September 2026 is 317.9 GWh, up 4.48% month on month. On the resource side, the significance of independent controllability of domestic lithium resources has become more prominent. Nickel: This week, the LME nickel price was $16,385/ton, up 0.92% from last week; the SHFE nickel price was 125,320 yuan/ton, up 0.99% from last week. This week, SHFE nickel inventory was 108,100 tons, LME nickel inventory was 284,900 tons, and total inventory was 393,000 tons, up 1.5% from last week. On the supply side, the nickel sulfate smelting sector this week continued to be dragged down by persistently negative margins. Some producers maintained their previous cautious production pace, and suspended producers have not yet resumed production. However, some producers also halted electrowinning, increasing nickel sulfate output. Market circulating supply remained relatively loose, and overall on-site supply rose slightly. On the demand side, battery-grade nickel sulfate demand this week remained at a rigid procurement level. Ternary precursor enterprises only executed established long-term agreements, with low willingness to actively restock before the holiday. Downstream cathode plants adhered to a production-by-sales model, raw material inventories remained low, and they continued to press for lower prices even as upstream quotations were reduced, causing the scale of spot market transactions to shrink. Demand for electroplating-grade nickel sulfate was similarly flat, with PCB and hardware enterprises making only rigid purchases and very few new bulk orders. Rare earths & magnetic materials: This week, praseodymium-neodymium prices rose, while dysprosium-terbium prices fell. As of Wednesday this week, the average market price of praseodymium-neodymium oxide was 735,500 yuan/ton, up 0.89% from last Friday's price; the average market price of dysprosium oxide was 1,435,000 yuan/ton, down 0.35% from last Friday's price; the average market price of terbium oxide was 6,575,000 yuan/ton, down 0.75% from last Friday's price. From the perspective of supply-demand fundamentals, the supply side was stable: separation enterprises operated normally, oxide supply remained tight, and as the dual festivals approached, upstream holders kept quotations firm and were unwilling to sell at low prices. The number of spot goods in the market was limited, metal plants operated steadily overall, and oxide and metal market supply before the holiday was relatively stable. Demand-side release was limited: on the eve of the Mid-Autumn Festival and National Day holidays, magnetic material enterprises made only small rigid restocking purchases, some small and medium-sized plants purchased, downstream order release was average, and pre-holiday restocking volumes were limited. Magnetic material producers mostly focused on consuming inventory, arranged holidays according to production schedules, and were cautious in procurement and restocking. Risk warnings: A sharp global economic recession, with consumption shrinking precipitously; U.S. inflation spiraling out of control, the Federal Reserve tightening monetary policy more than expected, and a strong dollar suppressing equity asset prices.