Post-Holiday First Week Trend Analysis: Cost Support and Demand Recovery Drive Price Rebound [SMM Analysis]

February 5-8, 2025, the nickel market experienced a "good start" after the Chinese New Year, with prices showing a trend of opening low and closing high. This week, the average price of SMM 1# refined nickel was reported at 126,750 yuan/mt, showing relatively small changes compared to the week before the holiday, mainly influenced by cost-side support, expectations of demand recovery, and tight supply. Cost Side: Tight Nickel Ore Supply Drives Prices Up The main driving force behind the nickel price increase this week came from cost-side support. As the world's largest nickel ore supplier, Indonesia's nickel ore quota policy uncertainty has triggered widespread market concerns. Although Indonesia's 2025 nickel ore quota approval is relatively high, the Philippines' attempt to emulate Indonesia's policy has strengthened miners' sentiment to stand firm on quotes, further pushing up ore prices. Additionally, the premium on Indonesian nickel ore has risen to $17-18/mt, with some high-priced transactions even reaching $20/mt, directly increasing the production cost of refined nickel. Demand Side: New Energy Demand May Rebound in Q2 On the demand side, the nickel market showed a clear divergence. In the stainless steel sector, due to weak end-use demand and the slow resumption of production by steel mills after the holiday, nickel prices received relatively limited support. However, attention is focused on changes in new energy demand in Q2 this year, especially for nickel sulphate, which may become the main driver of nickel demand growth. The market generally expects that with the rapid development of the NEV industry, nickel demand will gradually rebound. Supply Side: Refined Nickel Surplus Persists Despite some demand recovery before the Chinese New Year, the surplus in refined nickel supply remains unresolved. During the holiday, domestic refined nickel production remained stable, coupled with the outflow of electrodeposited nickel, leading to a continuous increase in LME nickel inventory. The supply-side pressure remains significant both domestically and internationally. However, the uncertainty of Indonesian nickel ore supply and the Philippines' review of the raw ore export bill provided short-term support for market sentiment. Future Trend: Nickel Prices Likely to Fluctuate Rangebound In summary, in the short term, nickel prices are expected to be supported by cost-side factors and demand recovery expectations, but the surplus in refined nickel supply limits the upside room for prices. Nickel prices are expected to fluctuate rangebound next week, with a focus on Indonesia's nickel ore policy developments and the actual recovery of demand in the stainless steel and new energy sectors.