On April 27, the main nickel futures contract on the Shanghai Futures Exchange closed at 149,310 yuan per tonne, marking a gain of 3.05%. During the session, it reached a high of 150,280 yuan per tonne, setting a new peak since February 2026. Open interest increased by 15,755 lots to 191,745 lots, with a trading volume of 524,000 lots and net capital inflows of 519 million yuan.
The significant price increase is attributed to several factors. Firstly, Indonesia has substantially reduced its national nickel mining quota for 2026 from 379 million tonnes to approximately 260-270 million tonnes, a cut of over 30%. Specifically, the initial quota for the Weda Bay mine is only 12 million wet tonnes, a decrease of more than 70% compared to the 42 million wet tonnes in 2025. It is anticipated that the mine will enter a maintenance shutdown after its quota is exhausted around mid-May, intensifying market concerns over a supply shortfall.
Secondly, a disruption in sulfur supply is increasing costs for high-pressure acid leaching (HPAL) processes. Indonesia relies on the Middle East for about 75-80% of its sulfur imports. Producing one tonne of mixed hydroxide precipitate (MHP) requires 9-10 tonnes of sulfur. Due to shipping blockades in the Strait of Hormuz, the purchase price for sulfur with a July delivery date for one Indonesian MHP producer has recently reached $1,100-$1,200 per tonne, more than double the price at the start of the year. Consequently, several Indonesian nickel processing companies have been forced to reduce output by at least 10% since last month.
Thirdly, Indonesia's new HPM (Harga Patokan Mineral) policy, effective April 15, has reshaped the cost curve for mining. The policy significantly increased the adjustment factor for nickel ore with a 1.6% grade from 17% to 30% and, for the first time, incorporated associated elements like cobalt and iron into the pricing calculation. This has led to a substantial rise in mining taxes and fees, pushing overall smelting costs higher.
Furthermore, an influx of speculative capital has re-entered the nickel market, contributing to the upward price momentum. Strong bullish sentiment following technical breakouts has created a dynamic where these new funds interact with existing fundamental positions, collectively driving futures prices higher.
Looking ahead, the trend of tightening supply from Indonesia appears firm. However, the supplementary approval process for the Weda Bay Nickel (WBN) quota is estimated to take about 35 working days. If the sulfur shortage persists, further production cuts at HPAL lines are likely. On the other hand, China's refined nickel production is estimated at 38,830 tonnes for April, up 4% month-on-month, and global visible inventories remain high, indicating that the overall supply surplus has not yet reversed. Key factors to monitor going forward include the progress of quota supplements, the restoration of sulfur supplies, and the actual absorption of demand from downstream sectors.
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