[Analysis] Nickel prices fluctuated sharply this week, falling first then rising, with spot inventory increasing slightly.

Nickel prices experienced significant volatility this week, showing a pattern of falling first and then rising. Early in the week, the positive impact of the US Fed's third interest rate cut this year failed to provide effective support; high inventory and market pessimism drove nickel prices to break through support levels and hit a new low for the period. A strong rebound began on Wednesday. As of the close on December 19, the most-traded SHFE nickel contract 2601 settled at 117,180 yuan/mt, surging 3,600 yuan/mt for the day and gaining 1.27% for the week. LME nickel prices moved in sync, hitting a weekly low of $14,235/mt early in the week before staging a strong rebound, ending the week up 1.50%. In the spot market, the average price of SMM #1 refined nickel this week was 116,820 yuan/mt, up 1,900 yuan/mt WoW. The average premium for Jinchuan nickel this week was 6,100 yuan/mt, rising 1,400 yuan/mt WoW. The premiums and discounts for mainstream domestic brands of electrodeposited nickel ranged from -100 to 400 yuan/mt. Approaching year-end, downstream purchase willingness weakened, and persistently high spot premiums dampened traders' stockpiling willingness, resulting in sluggish spot market transactions.

On the macro and market news front, US CPI rose 2.7% YoY in November, significantly lower than the market expectation of 3.1%, strengthening market expectations that the US Fed will maintain loose monetary policy. The market currently exhibits a rare "central bank policy divergence": the US Fed has started an interest rate cut cycle, while the European Central Bank signaled a hawkish stance, and the Bank of Japan hiked rates "against the trend," intensifying foreign exchange market volatility. The Indonesia Nickel Miners Association (APNI) stated that the government's nickel ore production target in the 2026 Work Plan and Budget (RKAB) is approximately 250 million mt, a significant decrease from the 379 million mt set in the 2025 RKAB. However, the final implementation method remains unclear. This news fueled market expectations of tightening nickel ore supply, becoming the most direct driver pushing nickel prices higher. In the short term, nickel prices are supported at the bottom by integrated MHP costs, leaving limited downside room, but upside potential remains capped by high inventory and weak demand fundamentals. The most-traded SHFE nickel contract price is expected to fluctuate within the range of 112,000-118,000 yuan/mt.

Inventory side, Shanghai Bonded Zone inventory was around 2,200 mt this week, flat WoW.

Domestic social inventory was approximately 59,000 mt, building by 240 mt WoW.