The price of nickel retreated from its recent highs after mid-May, with the downward pressure stemming not only from broader macroeconomic headwinds but also from a loosening supply from mines and persistently high inventories of refined nickel. The price has now largely returned to the vicinity of its previous trading range.
Short-Term Nickel Ore Supply Appears Loose
Following the end of the rainy season in the Philippines, ore supply has continued to ease, leading to a decline in ore prices. Last week, CIF offers for 1.3% grade ore in China were between $48 and $50 per wet metric ton, 1.4% grade was offered at $56-$58, and 1.5% grade at $64-$66, representing a decrease of $1-$2 per wet metric ton across grades compared to the previous week. Freight rates remained relatively stable at elevated levels, with the rate from Surigao to Lianyungang around $15 per wet metric ton. With geopolitical tensions easing, bunker fuel costs are expected to decline, which could lead to lower freight rates. According to the Philippine Statistics Authority, nickel ore exports in April reached 8.34 million metric tons, showing a seasonal recovery and a significant year-on-year increase of approximately 54%. Data from China's General Administration of Customs shows that China imported 5.9586 million metric tons of nickel ore in May, continuing a substantial month-on-month increase and rising 52.7% year-on-year, primarily influenced by a significant surge in supply from the Philippines. Cumulative imports for the first five months of the year reached 13.86 million metric tons, a 33.2% increase year-on-year, with about 89% of that coming from the Philippines. Regarding port inventories, as of June 19, Mysteel data showed nickel ore inventories across 14 Chinese ports stood at 9.4104 million wet metric tons, reflecting a seasonal build-up, with Philippine-origin ore inventories accumulating to 9.0104 million metric tons.
In Indonesia, local nickel ore supply is relatively ample. Some mines are actively ramping up production to take advantage of favorable weather windows, leading to a softening in previously high prices. Actual procurement prices for pyrometallurgical ore are mostly at a premium of $5-$8 per wet metric ton. The HPM price for various nickel ore grades in the latter half of June has been adjusted downwards. Recent policy regarding nickel ore quotas in Indonesia has shown some flexibility. The Minister of Mining stated that the government will implement an orderly and flexible policy for mineral and coal RKABs (Work Plan and Budget Approvals). Adjustments to production quotas will be linked to commodity price trends and domestic demand; if prices are favorable, production quotas could be relaxed. The market is currently awaiting the opening of the quota revision window in July, with attention on the potential scale of supplementary quotas.
Intermediate Product Supply Slightly Tight
According to Mysteel, China's nickel pig iron (NPI) production in May, calculated in metal content, was 27,200 metric tons, an increase of 11.8% month-on-month. This rise was driven by profit recovery due to lower production costs, inventory drawdowns prompting restocking production, and production disruptions in Indonesia creating space for domestic output. After June, NPI plants still maintained slight profitability, and production is expected to continue growing. Indonesia's NPI production in May was 137,800 metric tons in metal content, a slight decrease of 1,000 metric tons from April. Production faced disruptions in June, as Tsingshan Group requested NPI producers in its Indonesia Weda Bay Industrial Park to curtail output to prioritize power supply for aluminum smelting. Additionally, a certain RKEF project planned to convert some high-NPI production lines to nickel matte. Concurrently, the Indonesian government's freeze on mining companies that have not submitted RKAB quotas has exacerbated raw material supply tightness. China imported 909,800 metric tons of nickel iron in May, up 7.1% month-on-month and 8% year-on-year. Cumulative imports for January-May were 4.317 million metric tons, down 2.6% year-on-year, with approximately 96% originating from Indonesia. In the spot NPI market, offers for high-grade NPI remain firm. High-grade material (above 12%) is offered around 1,190 yuan per nickel point (ex-ship, tax included), while material around 11% grade has greater room for negotiation. Spot available resources are relatively tight, prompting downstream users to gradually increase purchases of lower-grade material.
According to Mysteel, Indonesia's production of mixed hydroxide precipitate (MHP), an intermediate product from hydrometallurgical processes, was 28,800 metric tons in metal content in May, showing a slight recovery from April but still below previous high levels. Its nickel matte production in May was 29,800 metric tons, down from April, remaining at a relatively high level overall. In the short term, uncertainties persist regarding navigation through the Strait of Hormuz, and Indonesian sulfur/sulfuric acid prices remain elevated, maintaining a tight supply situation that will continue to impact hydrometallurgical operations. China imported 126,700 metric tons (physical weight) of nickel intermediate products from hydrometallurgical processes in May, down 18.2% month-on-month and 11.3% year-on-year. Cumulative imports for the first five months reached 749,000 metric tons, with the year-on-year growth rate slowing to 1.9%.
Refined Nickel Inventory Pressure Remains High
In May, Mysteel data showed China's refined nickel production was 33,751 metric tons, down 4.25% month-on-month and 6.23% year-on-year. Cumulative production for January-May was 174,000 metric tons, showing a slight decline compared to the same period last year. The May production drop was attributed to major refined nickel producers facing challenges with raw material supply and sales. After June, as nickel prices fell and raw material tightness showed no significant signs of easing, profits for producing refined nickel across various processes have turned negative, suggesting limited potential for a production recovery. Indonesia's refined nickel production in May remained stable at 9,800 metric tons. Cumulative production for January-May was 48,600 metric tons, a substantial 89% increase year-on-year, with overall output exhibiting a pattern of consolidation at high levels.
The trend of rising domestic refined nickel inventories has not reversed. The latest total nickel inventory on the Shanghai Futures Exchange has increased to 96,789 metric tons, with registered warehouse receipts at 93,955 metric tons, representing an absolute high level. Spot premiums for Jinchuan electrolytic nickel are hovering at low levels, while mainstream electrodeposited nickel is mostly trading at a slight discount. Spot trading activity is subdued. LME nickel inventories remain stable at high levels with little change, with total stocks around 276,000 metric tons and registered warrants hovering near 264,000 metric tons. The cash-to-three-months spread remains in a contango of around $200 per metric ton.
Overall Demand Remains Weak and Stable
On the stainless steel front, Mysteel statistics show China's production of 300-series stainless steel crude steel in May was 2.0576 million metric tons, up 4.9% month-on-month and 15.3% year-on-year. Stainless steel mills maintained reasonable profitability, and the ongoing cost advantage of short-process smelting supported the high operating rates for the 300 series. Production in June is expected to remain largely stable with a slight decrease. Since April, social inventories of 300-series stainless steel have largely remained around 700,000 metric tons, indicating inventory pressure is not excessive. Downstream demand is in a seasonal lull, with purchasing capacity weakening.
In the new energy sector, prices for battery-grade nickel sulfate have also retreated from previous highs. However, the tight supply situation for intermediate products has not changed, providing strong cost support. Nickel salt producers are maintaining firm offers, while downstream ternary precursor procurement remains primarily for immediate needs, with no significant increase in volume. On the terminal side, China's production and sales of new energy vehicles in May reached 1.554 million and 1.496 million units, respectively, representing year-on-year increases of 22.4% and 14.4%, showing a clear improvement in growth rates compared to April. Ternary battery installations in May reached 13,400 MWh, also showing a noticeable improvement compared to the preceding months.
Summary and Outlook
Overall, in the external environment, tensions in the Middle East involving the US, Israel, and Iran continue to fluctuate, and uncertainties persist regarding navigation through the Strait of Hormuz. Coupled with the ongoing hawkish sentiment from the Fed's June meeting, macroeconomic pressure remains. On the supply and demand front, nickel ore supply from the Philippines is increasing rapidly, and potential quota increments from Indonesia may materialize in July. Regarding intermediate products, Chinese NPI production is increasing, but supply disruptions at Indonesian plants are causing spot resource tightness. Indonesian hydrometallurgical intermediate product output is being hampered by insufficient sulfuric acid supply. China's refined nickel production is declining slightly from high levels, with cost factors providing some support for nickel prices. The trend of inventory accumulation for domestic nickel has not changed, while LME nickel inventories remain stable. Downstream 300-series stainless steel production remains decent, but terminal consumption is in a seasonal lull, and demand for ternary batteries is primarily for immediate needs. In summary, macroeconomic pressure, loose ore supply, and high refined nickel inventories are exerting downward pressure on nickel prices. Conversely, slightly tightening intermediate product supply and cost support are likely to limit the downside. In the short term, nickel prices are expected to trade within a range-bound pattern.