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

Nickel prices experienced significant volatility this week, showing a pattern of initial decline followed by a rebound. Early in the week, the third interest rate cut by the US Fed 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. By 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% WoW. LME nickel prices moved in sync, hitting a weekly low of $14,235/mt early in the week before rebounding sharply, 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. 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 reduced 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 begun an interest rate cut cycle, while the European Central Bank has sent hawkish signals, and the Bank of Japan has "bucked the trend" by raising rates, intensifying volatility in the foreign exchange market. 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 nickel ore supply tightening, 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. However, upside potential remains constrained by high inventory and weak demand fundamentals.

The most-traded SHFE nickel contract is expected to trade within the range of 112,000-118,000 yuan/mt. Inventory side, social inventory in the Shanghai Bonded Zone was around 2,200 mt this week, flat WoW. Domestic social inventory was approximately 59,000 mt, up 240 mt WoW.