In early December, nickel prices initially fluctuated within a narrow range before experiencing a rapid decline, followed by a sharp rebound. The persistent oversupply pressure in the industry chain remains significant, with the Shanghai nickel index dropping to a low of 112,000 yuan per ton and LME nickel falling to $14,235 per ton. However, prices quickly recovered after reports suggested Indonesia might reduce its nickel production target for next year.

**Indonesia’s Nickel Policy Sparks Uncertainty** Indonesia accounts for 60-70% of global nickel production, making its industrial policies a key driver of global nickel supply. Recent market developments include: - The Indonesian Nickel Miners Association (APNI) indicated that the government’s 2026 Work Plan and Budget (RKAB) proposes a nickel ore production target of approximately 250 million tons, significantly lower than the 379 million tons set for 2025. However, this target remains provisional, with the Ministry of Energy and Mineral Resources (ESDM) still deliberating future nickel mining quotas. - Indonesia plans to revise its nickel pricing formula in early 2026, treating by-products like cobalt as independent commodities subject to royalties, which could increase production costs.

According to Mysteel, imported nickel ore prices in China remained stable in December, with the Philippines' Eramen mine selling 1.4% nickel ore at $40 FOB. Downstream companies showed moderate restocking demand ahead of the new year, easing price pressure. Shipping costs held steady, with rates from Surigao to Lianyungang at $11.5 per wet ton and to Jinzhou at $12.5 per wet ton. Indonesia’s domestic premium remained at +25, with a slight expected decline in December’s benchmark price.

China imported 3.34 million tons of nickel ore in November, a seasonal decline but up 3.6% year-on-year, with 90.5% sourced from the Philippines. Cumulative imports for January-November reached 40.17 million tons, up 10.3% YoY. As of December 19, Mysteel reported nickel ore inventories at 14 major Chinese ports at 14.39 million wet tons, slightly down from recent highs, with mid-to-high-grade ore accounting for 6.7 million wet tons.

**Weak Growth in Nickel Pig Iron (NPI) Production** Mysteel data shows China and Indonesia produced 179,300 tons of NPI in November, up 0.3% month-on-month and 9.1% year-on-year. High-grade NPI output reached 172,900 tons, up 0.3% MoM and 9.7% YoY. Cumulative production for January-November rose nearly 18% to 1.93 million tons.

Domestic high-grade NPI prices rose slightly in early December but declined again last week due to weak demand and high inventories. Some Chinese smelters halted production due to losses, while Indonesian producers also faced profitability challenges. Steel mills remained cautious in purchasing NPI, keeping the market in a wait-and-see mode. China’s November NPI imports dipped slightly to 895,400 tons, with 97% sourced from Indonesia.

**Refined Nickel Output Declines** Russia’s Nornickel forecasts a global nickel surplus of 240,000 tons this year, up from an earlier estimate of 120,000 tons, and raised its 2024 surplus projection to 275,000 tons. China’s November refined nickel output fell 14.8% MoM to 28,392 tons, with some producers shifting to nickel sulfate. Cumulative output for January-November rose 27.3% to 381,700 tons. Production losses persisted across all refining methods, with laterite ore-based refining costs at around 119,000 yuan per ton.

Shanghai Futures Exchange (SHFE) nickel inventories continued climbing, reaching 45,280 tons by December 19, with registered warrants at 37,602 tons. LME nickel inventories hovered around 254,000 tons after peaking at 258,000 tons in mid-November, with spot discounts near $190 per ton, indicating a still-loose supply.

**Sluggish Demand** Nickel demand primarily comes from stainless steel, ternary batteries, and nickel alloys. Mysteel reported China’s November 300-series stainless steel output at 1.76 million tons, down 32,000 tons MoM, with December production expected to dip further. Stainless steel inventories fell for three consecutive weeks, but end-user demand remained weak. Starting January 1, China will implement export license controls for stainless steel, potentially boosting short-term exports.

In the battery sector, nickel sulfate prices edged down to 27,430 yuan per ton by late December due to weaker demand. Ternary battery installations rose MoM and YoY in November, while new energy vehicle production and sales grew 20% and 20.6% YoY, respectively.

**Conclusion** While Indonesia’s potential policy adjustments provided short-term price support, the overall nickel market remains oversupplied. Ore prices may stabilize, but high inventories and weak downstream demand—particularly in stainless steel and nickel sulfate—limit upside potential. Shanghai nickel faces resistance at 122,000-125,000 yuan per ton.

*For reference only.* *Author: Qu Yajuan, Certified Analyst (F03113549), Changan Futures Nonferrous Metals Analyst.*