The situation in Indonesia's nickel market is characterized by a price inversion, where market prices fall below official benchmarks, squeezing small and medium-sized miners with low selling prices and high tax burdens. This development has quickly influenced supply expectations, refocusing market attention on supply variables from the world's largest nickel producer and intensifying short-term market sentiment.

Reports indicate a significant misalignment in Indonesia's domestic nickel ore pricing. Miners, particularly smaller operations, are seeing their profit margins continuously squeezed between low prices and high taxes, potentially forcing some marginal production capacity to adjust.

The spot price for 1# nickel on the Yangtze River Nonferrous Metals Market averaged 130,050 yuan per tonne today, an increase of 1,200 yuan, with a trading range of 128,850 to 131,250 yuan per tonne. Strengthening spot prices and upstream mining disruptions are mutually reinforcing, with trading inquiry activity picking up compared to the previous two days.

The latest price for Shanghai nickel futures contracts is 129,330 yuan per tonne, up 630 yuan. Trading is ongoing, with capital flows focused on the Indonesian supply narrative. Open interest remains around 228,000 lots, indicating unresolved divergence between bullish and bearish positions.

The average price for nickel sulfate held steady at 33,100 yuan per tonne. Demand from the new energy sector for nickel salts has been flat, preventing the supply-side story from fully translating into increased downstream purchasing. There is a time lag in the industrial chain transmission, and the foundation for sustained price increases is not yet solid.

Stainless steel remains the primary consumer of nickel, and its raw material procurement pace dictates demand absorption. Currently, steel mills have limited acceptance for high-priced nickel pig iron. If rising ore costs are passed through to nickel pig iron, cost pressures will extend to end-users, and rebalancing supply and demand will take time.

Shanghai nickel inventories for the week ending July 10 stood at 99,097 tonnes, a weekly decrease of 2,525 tonnes. The continued inventory drawdown reflects tightening availability, but the absolute inventory level remains high, which weakens the marginal impact of supply contraction. Inventories continue to act as a latent constraint on prices.

If the pricing mechanism dislocation in Indonesia's mining sector persists, the long-term landed cost of nickel ore may rise. Market participants are advised to monitor subsequent details of Indonesian export policies and actual changes in miners' operational rates. Supply-side disruptions remain prone to fluctuations and should not be interpreted with excessive bias.