The average spot price for 1# nickel on the Yangtze River Nonferrous Metals Market today was reported at 130,050 yuan per ton, marking an increase of 1,200 yuan, indicating a recovery in the electrolytic nickel segment.
However, a report from the CCMN platform on July 14th highlighted a concerning situation in the Indonesian nickel ore market, where market prices are inverted against benchmark prices, leaving small and medium-sized miners trapped in a dilemma of low selling prices and high taxes.
Where exactly are the profits going?
First Issue: Why Are Miners Struggling?
The core issue lies in a pricing dislocation for Indonesian nickel ore, with market prices falling below official benchmark levels, thereby suppressing the selling prices for small and mid-sized mining operations.
Compounded by tax burdens, the profit margins for marginal production capacity are being squeezed from both sides, leading to escalating operational pressures and dampening the willingness to operate mines.
Second Issue: Can Smelters Reap Benefits?
The latest price for Shanghai nickel futures stands at 129,330 yuan per ton, up 630 yuan as of the midday update, with the session not yet closed.
While the rising price of refined nickel should theoretically improve smelting profits, the inverted raw material cost structure weakens the efficiency of this price transmission through the supply chain.
Third Issue: How is Downstream Demand Responding?
The average price for nickel sulfate held steady at 33,100 yuan per ton, showing no change, while nickel chloride remained flat at 39,300 yuan per ton.
Demand for nickel salts from the new energy sector has not seen a significant increase, limiting downstream acceptance of price hikes and making it difficult for profits to transfer smoothly to the end-user segment.
Fourth Issue: What Do Inventory Levels Reveal?
Shanghai nickel inventories as of the week ending July 10th were 99,097 tons, a weekly decrease of 2,525 tons.
Although destocking continues, the absolute inventory level remains high, creating a counterbalance between cost support and inventory overhang, leaving prices lacking a clear, one-sided directional driver.
Overall, the rise in nickel prices appears to reflect more of a premium for supply-side disruptions at the mining level and short-term buying to cover positions, rather than a broad expansion of profits across the entire industry chain.
The intermediate processing segments are bearing the brunt of the volatility, with neither upstream nor downstream profits widening in sync.
If the inverted pricing for Indonesian ore persists, it could lead to an overall elevation of the industry's cost base, gradually filtering through to nickel pig iron and refined nickel quotations.
Future developments warrant close attention to potential adjustments in Indonesia's pricing mechanisms and changes in mining operations, as these cost-side tensions will ultimately define the upper limit for the price range.
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