The nickel and stainless steel markets posted modest gains in Tuesday's session, with policy developments in Indonesia continuing to dominate the price narrative.
On September 22, 2026, the main Shanghai nickel contract opened at 123,690 yuan per tonne and settled at 124,740 yuan per tonne, up 0.97% from the prior session's close. Trading volume reached 112,304 lots, a decrease of 4,456 lots, while open interest stood at 72,030 lots, down 12,445 lots.
Policy Dynamics in Indonesia
Indonesian policy shifts have entered a delicate negotiation phase, with looser expectations continuing to build momentum. The country has also signaled potential expansion of export supervision measures. As of the end of August, Indonesia's cumulative nickel ore production reached approximately 174 million tonnes, a year-on-year reduction of about 13 million tonnes, or roughly 7%. This decline is notably milder than the nominal quota contraction implied by the initial RKAB allocations at the start of the year. During the same period, nickel industry PNBP contributions climbed to approximately 21 trillion Indonesian rupiah, nearly doubling year-on-year.
Minister Bahlil has indicated that future RKAB allocations will give greater consideration to small and medium-sized mining enterprises, aiming to prevent production quotas from becoming overly concentrated among a handful of large players. The government's current RKAB management philosophy is shifting further toward an "optimal output" approach, using supply control to align with market demand in order to stabilize commodity prices. Greater emphasis is being placed on PNBP and overall national revenue rather than simply pursuing production expansion.
Supply-Side Developments
On the supply front, El Ni帽o conditions continue to disrupt Indonesian nickel ore output, though current mining and shipping efficiency has improved. Longer-term hydropower supply could face potential impacts. The HPM pricing framework has been revised once again, with Indonesia's ESDM signing Decision No. 363.K/MB.01/MEM.B/2026, amending the HPM nickel ore pricing rules. The new regulation substantially reduces the correction factor for low-grade ore with Ni content of 1.2% or less to 14%, significantly lowering the HPM base price for low-grade material.
Sulfur prices remain elevated in the short term but are showing signs of marginal softening. Due to concerns over high price levels, the MHP market is experiencing looser supply-demand dynamics, with MHP conversion coefficients under downward pressure. High-grade matte coefficients have remained stable, while the high-nickel pig iron market is clouded by a pessimistic atmosphere, with prices declining sharply amid supply recovery expectations and cautious downstream purchasing.
Demand-Side Weakness
Demand conditions remain subdued, with the traditional peak season expectations for September and October failing to materialize. End-user demand is weak, and the anticipated pre-season inventory building has not commenced, keeping transaction activity sluggish. This week, steel mills have shown notably more flexibility on pricing, with spot quotes tracking futures downward. The 304 cold-rolled segment continues to operate at a loss, and the disparity between inventory costs and raw material prices is widening. Although scrap stainless steel retains a clear cost substitution advantage, it cannot offset the fundamentally weak market, and prices are under pressure, limiting the potential benefits of substitution.
In the new energy sector, cathode material production is expected to decline, with ternary demand from the automotive segment remaining weak. According to Xinluo Lithium, September ternary material production is projected to fall 15%, while lithium iron phosphate output is expected to rise 6%. Ternary battery production is set to decline 7.36%, phosphate-based battery output to increase 7.12%, and total battery production to grow 5.2%.
Ore Market Dynamics
In the ore market, sources from Mysteel indicate that the rainy season in the Surigao region of the Philippines has been delayed, allowing nickel ore supply to expand steadily. Ore prices remain broadly stable but weak, while buyers have intensified their bargaining pressure. In Indonesia's Weda Bay mining area, 1.3% grade nickel ore traded at a CIF price of $40 per wet metric ton, while 1.4% grade material changed hands at CIF $50 per wet metric ton. Indonesian Ni 1.6% ore with 35% moisture was quoted at CIF $64.88 per wet metric ton, unchanged from the previous reading. Philippine Ni 1.3% ore was quoted at CIF $44.5 per wet metric ton at Lianyungang, also flat, while Ni 0.9% low-aluminum ore was priced at $40 per wet metric ton.
Spot Market and Inventories
Spot market activity shows weak import demand, with China's refined nickel imports falling 18.89% month-on-month in August, while nickel ore imports inched up 0.54%. Jinchuan nickel premiums have retreated from elevated levels, and overall trading sentiment has improved modestly, though transactions remain primarily driven by immediate needs. The Jinchuan nickel premium fell by 250 yuan per tonne to 3,850 yuan per tonne, while imported nickel premiums were unchanged at 50 yuan per tonne, and nickel briquette premiums held at 50 yuan per tonne. Shanghai nickel warrants stood at 93,130 tonnes, down 755 tonnes from the prior session, while LME nickel inventories reached 278,628 tonnes, up 102 tonnes.
Macro Environment
On the macroeconomic front, leaders from China and the United States are scheduled to meet in the United States on September 23. Meanwhile, tensions in the Middle East have shown signs of easing. CIF Indonesia sulfur prices are quoted at $990 per tonne, remaining elevated but with a marginal decline in the central tendency. Iran has stated it is willing to reopen the Strait of Hormuz within a week if the U.S. reduces military pressure and lifts blockades on Iranian ports. Bessent has expressed willingness to hold talks with Iran at the United Nations.
Strategy Outlook for Nickel
Market attention should remain focused on Indonesia's medium-term RKAB quota allocations and shifts in U.S. interest rate expectations. Current supply-demand fundamentals remain weak, with policy and macroeconomic factors serving as the primary price drivers. The marginal easing of Middle East tensions, expectations of looser Indonesian policy, renewed U.S. dollar strength, and elevated inventory levels are capping upside potential. However, smelting costs and some negative profit margins provide downside support. Nickel prices are expected to fluctuate within a weak range, with attention on subsequent Indonesian quota developments and broader macro-linked moves across non-ferrous metals.
For trading strategies, range-bound operations are recommended for single-leg positions. No recommendations are provided for calendar spreads, cross-commodity spreads, physical-futures arbitrage, or options.
Key risks include changes in domestic economic policies, Indonesian policy developments, and volatility in U.S. presidential statements.
Stainless Steel Market Analysis
On September 22, 2026, the main stainless steel contract opened at 13,770 yuan per tonne and closed at 13,745 yuan per tonne. Trading volume was 118,979 lots, down 48,074 lots, with open interest at 128,606 lots, a decrease of 4,171 lots.
The traditional peak season has failed to materialize for stainless steel, with the anticipated large-scale pre-holiday stocking ahead of the Mid-Autumn Festival and National Day yet to occur.
Industry Initiatives and Supply
On the fundamentals side, the China Iron and Steel Association issued the "Proposal for Comprehensive Self-Regulated Production Control and Inventory Reduction in the Steel Industry" on September 15. The proposal explicitly requires the entire industry to strictly implement production adjustment requirements and condemns any output exceeding quotas. It also calls for adherence to self-regulatory production controls, reduced inventories, and full utilization of steel enterprises' market position to quickly bring elevated inventory levels down.
On the supply side, September production schedules have been modestly reduced, with planned output of approximately 3.6173 million tonnes, down 3.31% month-on-month but still up 5.56% year-on-year. By series, both the 200 and 400 series show month-on-month reductions, while the 300 series is only marginally lower. September supply has contracted slightly from August, but absolute output remains at relatively elevated levels, and the year-on-year increase has not yet disappeared.
Demand and Downstream Sectors
Demand from traditional stainless steel-consuming industries remains persistently weak. Fixed asset investment fell 7.2% in the first eight months of the year, including a 2.3% decline in manufacturing investment and a 4.0% drop in infrastructure investment. Development investment declined 19.9% year-on-year over the same period, with new construction starts down 24.8% and new home sales area down 12.1%.
Production schedules in sectors such as home appliances are also declining. For September 2026, total combined production schedules for air conditioners, refrigerators, and washing machines stand at 27.21 million units, down 4.0% from actual production levels in the same period last year. By product category, September household air conditioner production is scheduled at 9.75 million units, down 7.7% from year-ago production levels; refrigerator production is planned at 8.52 million units, down 2.3%; and washing machine production is scheduled at 8.94 million units, a 1.2% decline.
Traditional sectors lack the impetus for large-scale inventory replenishment, with demand remaining largely needs-based.
Stainless Steel Spot Market
In the spot market, futures have continued to push higher while spot quotes remain relatively stable as the market awaits a demand recovery. Trading remains dominated by immediate needs, with subdued transaction volumes, and the expected peak-season stocking has yet to materialize on a significant scale. The Wuxi market stainless steel price stands at 14,175 yuan per tonne, unchanged, while the Foshan market price is 14,150 yuan per tonne, also flat. The 304/2B premium-discount range is between 490 and 740 yuan per tonne.
According to SMM data, the average ex-factory price of high-nickel pig iron including tax changed by -1.50 yuan per nickel point to 1,044.5 yuan per nickel point.
Stainless Steel Strategy
On the fundamental side, supply growth expectations outweigh demand-side developments, and with raw material prices moving lower in tandem, cost support may continue to shift downward. Macroeconomic and policy factors have become the primary drivers for stainless steel price movements. With the peak season failing to deliver, prices are expected to maintain a weak oscillation pattern.
The recommended stance is neutral for single-leg positions, with no recommendations for calendar spreads, cross-commodity spreads, physical-futures arbitrage, or options.
Key risks include changes in domestic economic and real estate policies, Indonesian policy developments, and volatility in U.S. presidential statements.
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