en.Wedoany.com Reported - In the first half of the year, the international nickel market experienced a round of structural repricing driven by supply-side policies. At the beginning of the year, Indonesia's tightening of nickel ore quotas pushed nickel prices to rebound from the bottom. In late February, the Middle East conflict sparked concerns over sulfur supply, coupled with the implementation of Indonesia's new mineral benchmark price policy, LME nickel prices surged, reaching $20,000 per ton in early May, a near two-year high. However, persistently high energy prices and renewed expectations of a Federal Reserve interest rate hike weighed on the non-ferrous metals sector. Coupled with high global pure nickel inventories, nickel prices subsequently corrected from their highs. In June, the Fed signaled a hawkish stance, further strengthening expectations of a rate hike within the year. Additionally, Indonesia indicated it might relax nickel ore mining quotas to meet smelting demand, strengthening expectations of increased quota volumes and putting downward pressure on nickel prices.
Indonesia's policy statements have had a significant impact on market expectations. The Indonesian government stated it would relax nickel ore mining quotas to meet smelting demand, with the market focusing on the second-half review of RKAB nickel ore quota approvals. Current information shows that Indonesia's 2026 RKAB nickel ore quota has been approved at 260 million tons, meeting the early-year target. The WBN nickel mine suspended operations for maintenance in mid-May due to quota shortages. Vale has applied for additional quotas for its hydrometallurgical projects, and mining companies collectively have strong incentives to apply for quotas. In early June, Indonesia stated it would relax quotas to match the actual production capacity of pyrometallurgical and hydrometallurgical plants. Although there have been recent rumors that Indonesia's nickel ore quota would be significantly expanded to 360 million tons, the Indonesian government has denied this, stating that new quotas must be tied to smelting capacity, leaving the total increase in quotas uncertain. In the second half of the year, close attention should be paid to the approval of Indonesia's nickel ore quotas. If quotas are approved beyond expectations, a decline in ore prices could weaken cost support for the nickel industry chain, and the magnitude of quota releases may determine the depth of the nickel price correction. In the medium to long term, the trend of tightening nickel resources in Indonesia may continue, and in the fourth quarter, the possibility of a repeat of the quota tightening narrative can be monitored.
Indonesia's imports of nickel ore from the Philippines continue to increase, and nickel ore prices have recently declined. Since last year, Indonesia's nickel ore deficit has largely been supplemented by Philippine ore. Indonesia's imports of Philippine nickel ore have risen significantly year-on-year, especially after the rainy season when supply growth is evident, leading to a decline in Philippine nickel ore prices. According to data from Mysteel, from January to April 2026, Indonesia imported 4.1915 million tons of nickel ore from the Philippines, a year-on-year increase of 70.5%, with annual imports expected to exceed 25 million tons. In Indonesia, the premium for pyrometallurgical nickel ore has narrowed to $1-5 per ton. Combined with a decline in the benchmark price, the price of Indonesian pyrometallurgical ore has fallen by about $7 per ton, with overall supply being ample. Hydrometallurgical ore, affected by reduced production of mixed hydroxide precipitate (MHP), has a spot price of $26-34 per ton, facing slight pressure.
After the resumption of navigation in the Strait of Hormuz, sulfur supply remains tight in the short term. Indonesia's domestic capacity for producing acid from oil and gas smelting is weak, with 70% of its sulfur relying on imports, of which about 75% comes from the Middle East. The escalation of the Middle East conflict in March led to a sulfur supply shortage, with sulfur prices once rising above $1,100 per ton, increasing sulfur's share in MHP production costs to over 40%. Currently, the Middle East situation has generally cooled down, and navigation in the Strait of Hormuz is gradually resuming. However, it takes more than two months for sulfur to be loaded and shipped to Indonesia, resulting in a long recovery period. In the short term, Indonesia's sulfur supply remains tight. The lag effect of sulfur supply recovery on cost support needs to be monitored. Additionally, fluctuations in sulfur prices significantly impact MHP production costs. As of June 26, the sulfur price was approximately $1,100 per ton, corresponding to an MHP production cost of about $15,000 per ton (after cobalt deduction). If sulfur prices subsequently fall to around $900 per ton, the MHP production cost would be about $14,000 per ton (after cobalt deduction), and the cost of processing into nickel cathode would be about $17,000 per ton (after cobalt deduction), potentially weakening cost support.
Global nickel inventories continue to rise, exerting strong downward pressure on nickel prices. Overseas, demand was weak in the first quarter, leading to a slight increase in LME nickel inventories. Since the second quarter, due to lower export profits, Chinese refined nickel producers have reduced deliveries to overseas warehouses, keeping LME nickel inventories stable at high levels. As of June 26, LME nickel inventories stood at 274,800 tons, an increase of 19,500 tons or 7.6% from the beginning of the year, and an increase of 70,500 tons or 34.51% year-on-year. Domestically, the pattern of stronger external markets and weaker domestic markets has opened the import window since March, but demand-side absorption has been limited, leading to a significant accumulation of domestic pure nickel social inventories. As of June 26, domestic social inventories were 129,200 tons, an increase of 68,200 tons or 111.7% from the beginning of the year, and an increase of 91,400 tons or 241.5% year-on-year. Recently, the import window for refined nickel has closed, which may slow the pace of domestic pure nickel inventory accumulation. Overall, high global nickel inventories are suppressing nickel prices, with spot premiums and discounts under continuous pressure. Traders are increasingly willing to offer concessions to sell, and combined with market expectations of future supply increases, inventories are unlikely to be reduced in the short term.
Downstream demand is in the off-season, with stainless steel production declining and the ternary battery chain mainly driven by essential demand. In the stainless steel sector, factors such as the rainy season and high summer temperatures have led to insufficient orders for end-use products like household decoration, hardware, and appliances, causing steel mills to reduce production schedules. Mysteel estimates that stainless steel production in June was 3.5332 million tons, a month-on-month decrease of 7.42%. Production schedules for steel mills have slightly rebounded in July, but production of 300-series stainless steel has further declined to 1.8721 million tons, a month-on-month decrease of 5.15%. In the new energy sector, production schedules for ternary precursors and cathode material companies have marginally slowed, maintaining essential procurement. The incremental demand from the new energy sector is currently insufficient to offset the seasonal weakening of demand in traditional sectors. Additionally, demand for nickel in industrial applications such as alloys and electroplating remains low.
Looking ahead, the magnitude and pace of Indonesia's RKAB nickel ore quota approvals remain the key variables determining the trend of nickel prices. If quotas are significantly relaxed, the narrative of tightening Indonesian ore supply would be disproven, and combined with high global nickel inventories, nickel prices may further seek a bottom. In the fourth quarter, attention can be paid to whether the quota tightening narrative can be repeated. If quotas increase moderately, the nickel ore market may maintain a tight balance, and after market concerns ease, nickel prices may fluctuate, awaiting opportunities to buy on dips. If quota releases fall short of expectations, the narrative of tightening nickel ore supply will continue, providing upward momentum for nickel prices. Additionally, after the resumption of navigation in the Strait of Hormuz, the risk premium for sulfur supply concerns has declined, but actual sulfur supply in Indonesia remains tight in the short term. High sulfur prices still provide cost support for MHP, and the lag effect of sulfur supply needs to be monitored. Overall, expectations of a Federal Reserve rate hike are rising, and a strong US dollar continues to suppress non-ferrous metal prices. However, as the Middle East situation eases and energy prices fall, inflationary pressures may be alleviated. July is the application window for Indonesia's RKAB nickel ore quotas. It will take time for the results of incremental approvals for mining companies to materialize, but pessimistic expectations have already formed. Nickel prices may fluctuate weakly in the short term, with attention on the cost support from integrated nickel cathode production. The impact of repeated Indonesian policy news on the market needs to be monitored. In the second half of the year, close attention should be paid to the magnitude of Indonesia's nickel ore quota approvals and the pace of production releases, the recovery of sulfur supply, and changes in nickel inventories. The recommended strategy is to wait and see, with short-term bearish and long-term bullish positions, and to pay attention to risk control.
