[Analysis] Nickel prices experienced sharp fluctuations this week but closed higher, while domestic inventories still increased significantly.

Nickel prices continued to be dominated by expectations of tightening production quotas (RKAB) for Indonesian nickel mines in 2026, experiencing sharp fluctuations before closing strongly higher. Early in the week, the market digested previous gains and corrected due to inventory pressure, but mid-week, Indonesian officials again announced targets to reduce quotas, strongly stimulating bullish sentiment and driving a sharp rebound in nickel prices, with the most-traded SHFE nickel contract even hitting the upside limit at one point during the week. Although the "strong expectations" of supply contraction continued to ferment, the "weak reality" of high global inventories and soft downstream demand remained fundamental constraints, leading to sharp price volatility. In the spot market, the average SMM #1 refined nickel price this week was 147,580 yuan/mt, up 7,450 yuan/mt WoW. The average premium for Jinchuan nickel this week was 8,200 yuan/mt, down 2,500 yuan/mt WoW. The premium/discount range for mainstream domestic electrodeposited nickel brands was -200-500 yuan/mt. Spot trading of refined nickel was sluggish this week, speculative stockpiling faded, and end-user purchase willingness was poor.

On the macro front, domestic easing policies intensified. On January 15, the People's Bank of China announced a 0.25 percentage point cut in interest rates on various structural monetary policy tools, with the one-year relending rate dropping to 1.25%, aiming to strengthen counter-cyclical adjustment and provide liquidity support to the market. The US dollar index rebounded this week, hitting a four-week high of 99.49, as stronger-than-expected US non-farm payrolls data pushed back expectations for the timing of a US Fed interest rate cut. In the short term, the tug-of-war between Indonesian policy expectations and the reality of high inventories will continue, with nickel prices expected to hover at highs. The fluctuation range for the most-traded SHFE nickel contract is seen at 140,000-155,000 yuan/mt.

In terms of inventory, stocks in the Shanghai Bonded Zone were around 2,200 mt this week, flat WoW.

Domestic social inventory was about 64,000 mt, up 2,463 mt WoW.