The most-traded nickel contract for September delivery on the Shanghai Futures Exchange (ShFE) closed 4.6% higher at 146,380 yuan ($22,603) a tonne on Thursday as worries over refined supply and dwindling stockpiles prompted enthusiastic buying.

On the LME, nickel prices were also buoyed by renewed appetite for riskier assets after US inflation figures cooled talk of higher interest rates in the world’s largest economy. In London, benchmark nickel advanced 1.4% on the day to $19,635 per tonne, its third straight session of gains and the highest since August 2.

“Nickel has one of the most positive short-term fundamentals – there are a lot of signs of very good demand,” Citi analyst Oliver Nugent told Reuters.

Demand for nickel for making stainless steel, which accounts for the majority of its consumption, has soared and the metal is also being boosted by the outlook for electric vehicles as nickel-rich cathode chemistries make inroads.

Refined output in top producer China fell 15.7% year-on-year between January and July and by 13.5% in July compared with June, state-backed research house Antaike said.

At the same time, warehouses monitored by the ShFE saw inventories drop to near record lows touched in June at just 6,707 tonnes. Available for delivery nickel in the LME network of global warehouses fell to under 150,000 tonnes, their lowest since March 2020.

Macquarie expects the nickel market to flip to a 100,000-tonne deficit this year from a surplus of a similar margin in 2020 due to higher Chinese demand and supply disruptions, analyst Jim Lennon said.

But nickel supply will likely start to overtake demand in the fourth quarter, which could weigh on prices, he added.