The Supply Surplus Pattern Is Hard to Change, SHFE Nickel Faces "Bearish Pressure" and Drops Nearly 3%—Key Points to Watch Next! [SMM Analysis]

SMM, January 23: On January 23, SHFE nickel fluctuated downward, leading the decline in domestic base metals with a nearly 3% drop, dragged by factors such as the potential increase in Indonesia's mining quota, bearish macro sentiment, and weakened downstream demand. By the close of the daytime session, the most-traded SHFE nickel contract fell 2.74% to 124,150 yuan/mt. As for LME nickel, it also showed a downward trend today. By 16:48, LME nickel had dropped 0.85% to $15,585/mt. In the spot market, according to SMM spot quotations as of January 23, SMM 1# refined nickel spot prices also faced a decline today, falling by 2,700 yuan/mt to 123,950–126,950 yuan/mt, with an average price of 125,450 yuan/mt, marking a single-day drop of 2.11%. 》Click to view SMM nickel spot quotations Regarding the reasons for the recent decline in nickel prices, SMM believes there are three main factors: First, bearish macro sentiment. On January 21 local time, US President Trump stated that the US government is discussing imposing a 25% tariff on goods exported from China to the US starting February 1. Chinese Foreign Ministry spokesperson Mao Ning responded, "We have repeatedly stated China's position on this issue. We have always believed that trade wars and tariff wars have no winners, and China remains steadfast in safeguarding national interests." Currently, there is uncertainty surrounding Trump's tariff policy on China, and the extent of the tariffs is still a topic of debate in the market. Some market views suggest this move is aimed at increasing bargaining chips, and the market is awaiting policy details. The US dollar index remained above 108, putting pressure on non-ferrous metals. Second, on the news front, Indonesia's mining quota may increase. According to the latest information, Meidy Katrin Lengkey, Secretary General of APNI, stated that the approved nickel ore mining work plan and budget (RKAB) for 2025 totals 298.49 million mt. Currently, Indonesia's nickel ore production accounts for 63% of global output, leading to a supply surplus in the global nickel market. Regarding the previously discussed topic of production cuts, she mentioned, "Production cuts may target newly established companies that have not yet obtained government-approved RKABs. For companies that have just submitted applications, they may be re-evaluated. Many companies have not yet received approval." Therefore, for now, news related to Indonesia's RKAB is unlikely to boost the market, and the global nickel market is expected to remain relatively loose in H1 2025 compared to the same period last year. 》Click to view details Third, the drag from weakened demand. According to an SMM survey, in the downstream major consumption sector—stainless steel market, SMM learned that stainless steel companies entered the second wave of concentrated holiday periods before the Chinese New Year. The winter stockpiling atmosphere was relatively strong before the holiday, and the stainless steel market currently has significant inventory buildup. Post-holiday, the market is expected to focus on inventory digestion. Weakened downstream consumption has also put downward pressure on nickel prices. Inventory: As of January 17, SMM refined nickel social inventory totaled 42,397 mt, an increase of 2,542 mt or 6.38% compared to January 10. Last week, nickel prices fluctuated upward, market transactions were sluggish, and traders actively lowered spot premiums to facilitate sales, leading to a rapid decline in domestic spot premiums. This week's latest refined nickel inventory data will be released on January 24. Considering that most downstream companies have already gone on holiday, there is a need to remain vigilant about the risk of continued inventory buildup in refined nickel. In summary, nickel ore supply is expected to remain loose, the refined nickel market continues to show a surplus, and with the Chinese New Year approaching, weakened downstream consumption has put downward pressure on nickel prices. Moving forward, attention should be paid to macro guidance, post-holiday downstream recovery, and developments in Indonesia's nickel industry policies. In the short term, nickel prices are expected to maintain a fluctuating trend. Institutional Comments: Shanghai Zhongcai Futures stated that nickel ore supply is marginally loose, refined nickel surplus persists, and both domestic and overseas inventories continue to build up. On the demand side, the "program of large-scale equipment upgrades and consumer goods trade-ins" policy continues, and the decline in the real estate sector has narrowed, creating some demand expectations. However, macro disturbances such as US tariffs on China and monetary policy still weigh on the market. They expect the main pricing logic for refined nickel to revolve around costs, with elasticity focusing on the US dollar index, post-holiday downstream recovery, and Indonesia's nickel industry policies. They recommend primarily range-bound trading. Futures Daily commented that recent statements from Indonesian government officials acknowledged that the local government is reviewing quota conditions but has not yet implemented production cuts. They aim to balance corporate demand and capacity. This suggests that the Indonesian government intends to limit corporate capacity expansion to support nickel prices rather than significantly reducing supply. Since last year, high-cost nickel producers overseas have reduced production, but new capacity in China and Indonesia has gradually been released, offsetting the reduction in overseas capacity. The surplus pattern in the nickel industry chain remains difficult to reverse, with domestic and overseas nickel inventories continuing to rise, exerting significant pressure on nickel prices. News of Indonesia cutting nickel ore quotas has gradually been digested by the market. Against a backdrop of weak fundamentals and bearish macro sentiment, SHFE nickel faced significant downward pressure. Jinrui Futures stated that Indonesia's nickel ore is expected to remain in tight balance this year, with restrictions on smelting capacity expansion rather than prevention. Therefore, the surplus pattern remains clear, maintaining a cost-based pricing logic with some easing of policy risks. In the short term, Indonesia is unlikely to take further policy actions, and range-bound trading is still recommended, with opportunities to go long at lower levels within the range. Maike Futures noted that the Central Financial Office in China issued the "Implementation Plan for Promoting Medium and Long-Term Capital Market Entry," and attention should be paid to the press conference held domestically this morning. Overseas, policy fluctuations under Trump's administration have amplified market volatility. With the long holiday approaching, market funds are cautiously defensive, prioritizing risk avoidance. The spot market has entered holiday mode with sluggish trading, spot premiums pulling back, LME warehouse warrants continuing to rise, and pre-holiday trends likely to remain fluctuating. In the medium term, the trend is expected to be slightly bullish.