After a modest rally in July, nickel prices have since retreated, with Shanghai nickel futures hovering around 125,000-135,000 yuan per tonne. The market is dominated by a loose supply-demand balance, while frequent policy shifts in Indonesia's nickel ore sector are adding volatility.
Philippine nickel ore prices have remained stable recently. The CIF price for 1.3% grade nickel ore was $45-$47 per wet metric tonne (wmt) last week. Since July, freight rates from the Philippines to Chinese ports have fluctuated narrowly, with the Surigao-to-Lianyungang route at about $14/wmt. China's June nickel ore imports totaled 5.861 million tonnes, down 1.5% month-on-month but up 36% year-on-year. Cumulative imports for the first half of the year reached 19.702 million tonnes, a 33.9% increase, with the Philippines accounting for roughly 90% of the supply. Philippine supply is currently in a phase of significant expansion, with no major policy changes or mine disruptions. Port inventories tracked by Mysteel across 14 Chinese ports stood at 11.7565 million wmt as of August 7, continuing their upward trend, with Philippine-origin ore at 11.3065 million wmt.
In Indonesia, news emerged last week that Weda Bay Nickel (WBN) had received approval for an additional 25 million wmt of nickel ore RKAB (Mining Work Plan and Budget) quota for the second half of 2026. This would effectively secure raw material supply for downstream smelters later in the year, as the company's initial quota was largely exhausted by the second quarter. However, the Ministry of Energy and Mineral Resources subsequently denied the report, stating no official document had been issued. Despite this, expectations of increased quota availability persist, and news of new quota approvals will continue to be a market disruptor. Early this month, domestic nickel ore premiums in Indonesia generally declined, with Tsingshan's August premium for nickel ore falling to $2-$5/wmt.
Supply of intermediate products is seeing a small increase. According to Mysteel, combined China and Indonesia nickel pig iron (NPI) production in July was 166,900 tonnes in metal content, up 1.6% month-on-month. Cumulative output for the first seven months totaled 1.1204 million tonnes, a year-on-year decline of 8.1%. Indonesia's July output was 138,100 tonnes, relatively flat from the previous month, though the year-to-date decline is steeper due to production cuts and policy adjustments since early 2024. China's July NPI output was 28,800 tonnes, up roughly 2.5% month-on-month, supported by increased capacity at high-grade NPI producers, slightly improved profit margins, and decent operating rates. China's June NPI imports were 756,000 tonnes, down 16.9% month-on-month and 27% year-on-year, with imports from Indonesia falling both sequentially and annually. First-half imports totaled 5.072 million tonnes, a cumulative decline of 7.3% year-on-year, with Indonesia representing about 96% of the total. In the spot NPI market, long-short competition is intensifying. High-grade material is in tight supply, with sellers' quotes remaining firm. The mainstream price for high-grade NPI is 1,160-1,170 yuan per nickel unit (CIF Duty Paid), with a wide spread between high and low grades. Downstream stainless steel mills are cautious, showing weak purchasing appetite and mostly buying on a need-only basis.
Mysteel data shows that Indonesia's June production of intermediate products, such as mixed hydroxide precipitate (MHP) and nickel matte, both saw modest recoveries. While the sulfur supply issue has not been fundamentally resolved, there are signs of marginal easing. Iran is in the final stages of negotiations with Oman regarding the adjustment of the Strait of Hormuz shipping channel. China's first-half imports of nickel intermediate products totaled 852,000 tonnes, a cumulative decline of 1.3% year-on-year.
Refined nickel production has been declining consecutively. Mysteel reports that China's July refined nickel output was 30,787 tonnes, down 3.1% month-on-month and 14.8% year-on-year, continuing a downtrend since May. Output from a major producer in Gansu remained stable, but production was cut at a large plant in Quzhou, as well as small and medium-sized plants in Zhoushan, Qinzhou, and other areas, due to poor profitability. Profit margins for producing refined nickel via all current processes are inverted, suggesting August output is unlikely to recover. Nickel prices are also receiving support from the cost side. Indonesia's July refined nickel output was 8,800 tonnes, down 3.4% month-on-month. Domestic refined nickel inventories remain at elevated levels. Total SHFE nickel inventories increased by 1,277 tonnes to 113,300 tonnes last week, hitting an all-time high. Registered warrants have been hovering above 100,000 tonnes, creating significant inventory pressure. Spot premiums for Jinchuan electrolytic nickel are fluctuating in a low range. With ample supply, downstream restocking enthusiasm is limited. LME nickel inventories have edged down slightly from their post-July highs, currently at 264,000 tonnes, with registered warrants near 256,000 tonnes. The cash-to-3-month spread remains in a deep contango of around $200 per tonne.
Downstream, stainless steel production plans are decent. In the stainless steel sector, Mysteel estimates China's July output of 300-series stainless steel crude was 1.8392 million tonnes, down 6.9% month-on-month but up 8.3% year-on-year, primarily due to output cuts at a mill in Jiangsu province. August production is expected to recover as order books improve and some maintenance lines restart. 300-series stainless steel social inventories have generally declined from July to early August, falling to 656,000 tonnes, indicating manageable inventory pressure. End-user demand has not shown significant improvement, with purchasing mainly on an as-needed basis. In the new energy sector, prices for battery-grade nickel sulfate have been stable. The supply of intermediate products remains tight, with some producers showing willingness to support prices. However, downstream buyers are mostly covered by long-term contracts, and the spot market activity is weak with low acceptance of nickel salt prices. On the end-use front, China's June ternary battery installations totaled 12,700 MWh, a slight decline from May, accounting for 16.6% of total power battery installations, with the majority of market share being taken by LFP batteries.
In summary, the external environment features a delayed expectation of a Fed rate cut, though high long-term US Treasury yields could lead to a volatile risk appetite. On the supply-demand front, Philippine nickel ore supply is still in a phase of expansion, keeping ore prices stable. Indonesia's July application period for new quota has ended, and recent news of approvals will be a market disruptor, creating expectations of a looser supply. Output of intermediate products like NPI and MHP has seen modest increases, but spot supply remains slightly tight, lending price resilience. Refined nickel production is largely loss-making, with domestic output declining since May, providing cost support for nickel prices. SHFE nickel inventories continue to accumulate, keeping the refined nickel supply loose, while Jinchuan nickel spot premiums remain low. LME nickel inventories are slowly declining from their absolute highs, with the cash-to-3-month spread in a deep contango. Downstream, 300-series stainless steel production plans are decent, while demand from the ternary battery sector is primarily for essential needs. Overall, both pressure and support are evident, making it difficult for nickel prices to establish a clear direction in the short term, with prices likely to be influenced by news of Indonesia's new quota approvals. This is for reference only.
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