Nickel Prices Plunge as Macro Fund Outflows and High Inventories Weigh on Market

Published: Feb 2, 2026 15:01

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On February 2, 2026, a wave of limit-down declines hit the nonferrous metals sector. The most-traded SHFE nickel 2603 contract fell 11% intraday to hit limit-down, while the LME nickel 3M contract dropped over 7%, falling below $17,000/mt. The sharp decline in nickel prices today was mainly driven by the combined impact of macro fund outflows and the reality of high industrial inventories. Donald Trump nominated "hawkish" Kevin Warsh as Fed Chairman, shifting market expectations toward a more hawkish US Fed monetary policy, which boosted the US dollar. Additionally, previous nickel price gains, driven by expectations of tighter RKAB quota approvals for Indonesian nickel ore, were fueled by speculative funds, leaving them vulnerable to a correction due to insufficient fundamental support. When negative signals emerged, previously profitable bulls liquidated positions en masse, with open interest in the SHFE nickel weighted contract falling by over 30,000 lots in a single day. Concentrated selling triggered panic selling, accelerating the price decline.
Supply and demand side, according to SMM data, China's refined nickel production in January 2026 increased 20% MoM, increasing supply pressure; however, downstream end-use consumption showed no signs of recovery, spot market trading was sluggish, and most enterprises had already completed pre-holiday stockpiling. Inventory side, LME nickel inventory exceeded 280,000 mt, while domestic visible inventory also remained high. SMM's domestic refined nickel social inventory surpassed the 70,000 mt level last week, with a weekly inventory buildup of 4,349 mt.
This sharp decline exhibited strong systematic and emotional characteristics, coupled with relatively weak fundamentals. In the short term, nickel prices may remain under pressure. However, expectations for reduced Indonesian nickel ore quotas persist, leaving room for a potential rebound in nickel prices later.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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