Macro funds flood in, driving sharp nickel price rebound

Recently, nickel prices have sustained a rebound, breaking above the previous consolidation range. The main Shanghai nickel contract briefly approached 150,000 yuan per ton. On January 8, nickel prices experienced a sharp decline due to a substantial increase in LME inventories and waning bullish sentiment across the non-ferrous metals sector. By 3:00 PM on January 8, the main SHFE nickel contract settled at 136,800 yuan/ton, while the LME 3M nickel contract traded at 17,140 USD/ton.

The recent sharp rebound in nickel prices fundamentally stems from substantial macro-fund inflows amid broad commodity gains. This reversed the downward trend caused by industrial funds continuously squeezing the market amid oversupply conditions. According to the LME position report, investment funds have significantly increased their net long positions recently. As of December 29, 2025, commercial entities held a net short position of 31,633 contracts in LME nickel, an increase of 11,090 contracts compared to the same period the previous month. Investment funds held a net long position of 21,014 contracts, an increase of 10,573 contracts compared to the same period the previous month.

Significant fundamental pressure persists for nickel

From a supply-demand perspective, nickel will continue facing substantial surplus pressure in 2026 if Indonesia's nickel ore quota supply remains relatively ample. With the commissioning of certain Indonesian projects in 2026, the nickel supply surplus will remain pronounced, exerting significant downward pressure on both ferronickel and refined nickel prices. For nickel pig iron, supported by the fixed costs of pyrometallurgical processing, prices are expected to periodically fall below the cash costs of some producers. This will force production cuts or shutdowns, rebalancing supply and demand. For refined nickel, there is a possibility of a valuation anchor shift, potentially leading to weaker performance relative to nickel pig iron prices.

However, due to recent inflows of macro funds, refined nickel has become the strongest performing segment in the industry chain. As of January 8 data, ex-factory prices for 10%-12% high-nickel pig iron stood at ¥960/nickel ton, while SMM Grade 1 nickel traded at ¥149,050/ton. Refined nickel's premium over nickel pig iron reached ¥53,000/nickel ton. Simultaneously, refined nickel also commanded a significant premium over nickel sulfate. This substantial premium for refined nickel significantly boosts the incentive for Indonesia's RKEF plants to switch production to high-grade nickel concentrate and for MHP plants to produce refined nickel instead of nickel sulfate. Refined nickel output is expected to surge substantially in January.

Who Will Prevail: Macro Funds or Industrial Funds?

Fundamentally, the pressure from nickel industry oversupply remains pronounced. However, this does not imply that nickel prices will revert to their original levels due to the entry of industrial funds for hedging. Since December 22, 2025, open interest in SHFE nickel futures has increased by 139,000 contracts, equivalent to 139,000 metric tons of refined nickel. LME nickel futures open interest rose by 33,000 contracts, representing 198,000 metric tons of refined nickel. Even under a pessimistic scenario, refined nickel surplus in 2026 would remain below 300,000 metric tons. Currently, the scale of bottom-fishing capital is sufficient to absorb the annual surplus across the nickel supply chain.

Therefore, despite significant surplus pressure, the substantial volume of bottom-fishing capital shows no signs of retreating, making a sustained one-sided decline in nickel prices unlikely. Additionally, the uncertainty surrounding RKAB's potential quota reduction cannot be disproven in the short term, warranting a risk premium for nickel prices. Comprehensive projections suggest nickel prices may transition to a high-range oscillation pattern. However, persistent inventory growth or clear signals of bullish capital withdrawal could signal the gradual conclusion of the current upward trend.

As an integrated internet platform providing benchmark prices, on January 14th, the SunSirs' benchmark price for nickel was 145,750.00 RMB/ton, representing a 5.82% increase compared to the beginning of the month (137,733.33 RMB/ton).

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