Core Viewpoint - The nickel market is experiencing a shift from strong expectations to weak realities, leading to price adjustments due to high global inventories and reduced supply constraints from Indonesia [2][3]. Market Performance - The Shanghai nickel futures market showed slight gains, with the main contract closing at 129,460 CNY/ton, up 790 CNY/ton or 0.61% [1]. - The average price of nickel on January 16 was reported at 148,500 CNY/ton, down 3,300 CNY from the previous day [1]. Supply Side Analysis - The nickel market is currently in a marginally loose supply situation, with global visible inventories at high levels, creating downward pressure on prices [3]. - Despite some domestic smelters reducing output due to the upcoming Spring Festival and environmental factors, the import of refined nickel has significantly increased, filling domestic supply gaps [3]. - The reduction in Indonesia's nickel ore quotas for 2026 was less than previously anticipated, weakening the narrative of severe supply tightening [3]. Demand Side Analysis - Nickel demand is facing challenges, particularly in the stainless steel sector, which accounts for about 70% of nickel consumption, due to weak recovery in related industries [4]. - In the new energy battery sector, the market share of lithium iron phosphate batteries is expanding, impacting demand for nickel sulfate, with battery manufacturers maintaining only essential purchases [4]. Industry Chain Dynamics - The profit distribution within the nickel industry chain is becoming increasingly imbalanced, with upstream resource companies benefiting from high prices, while midstream and downstream sectors face significant pressure [5][6]. - Midstream nickel iron and nickel sulfate smelting companies are struggling with high raw material costs and declining product prices, leading to reduced operating rates and some companies reporting losses [5][6]. Market Outlook - The current spot market is characterized by low trading activity, with buyers showing minimal purchasing interest, leading to a "price without market" scenario [6]. - Nickel prices are expected to continue their downward trend in the short term, with potential testing of key support levels unless strong driving factors emerge [6].

Core Viewpoint - Indonesia's policy signal to potentially reduce nickel mining quotas for 2026 to 250-260 million tons has contributed to a rebound in nickel prices, with LME nickel futures reaching a 19-month high of $18,900 per ton [1][2]. Group 1: Policy Impact on Nickel Market - Indonesia's ongoing resource control policies are reshaping the global nickel market by increasing development costs and tightening production management [2][3]. - Goldman Sachs indicates that if Indonesia lowers its nickel mining quota to 260 million tons, global nickel supply growth will slow significantly, potentially raising the average price to around $18,000 per ton [2]. - The Indonesian government is shifting from an "expansion encouragement" approach to a "managed regulation" model, aiming to enhance its influence over international nickel pricing [2][3]. Group 2: Cost and Supply Adjustments - Since April 2025, Indonesia has raised the royalty rates for nickel mining, with rates increasing from 10% to between 14% and 19% for nickel ore, and from 5% to 7% for nickel pig iron and nickel matte [3]. - The approval cycle for nickel mining quotas has been changed from three years to one year to better align with market supply and demand [3]. - New regulations have tightened the entry criteria for nickel smelting projects, allowing only those with downstream processing plans to obtain industrial operating licenses [3]. Group 3: Demand and Supply Dynamics - Despite the positive policy signals, the global nickel market is currently experiencing a supply surplus, with production expected to exceed demand through 2026 [5][6]. - The global nickel production is projected to increase from 3.81 million tons in 2025 to 4.09 million tons in 2026, while demand is expected to rise from 3.6 million tons to 3.82 million tons [5]. - The demand for nickel in stainless steel remains stable, but growth in the renewable energy sector is weak, limiting overall demand growth [6][7]. Group 4: Structural Changes in Demand - The demand for nickel is showing structural differentiation, with stainless steel being the main support due to industrial upgrades, while the electric vehicle battery sector is experiencing a decline in demand [7]. - The impact of Indonesia's quota enforcement will be most directly felt in nickel pig iron (NPI) production, which is heavily reliant on ore supply continuity [7]. - The production of battery-grade nickel is expected to remain stable, with mixed hydroxide precipitate (MHP) showing potential for growth due to its adaptability to Indonesian nickel resources [7].