One side faces a mispricing situation for Indonesian nickel ore with small and medium miners expressing hardship, while the other side sees domestic spot 1# nickel prices falling against the trend by 400 yuan. The expectation of tightening supply is colliding head-on with the reality of weakening spot prices, causing the pricing logic of the nickel market to undergo recalibration, with the focus becoming who will ultimately bear the cost of this misalignment.

Ore Sector Challenges

According to a July 14th report, the market price for Indonesian nickel ore is below the benchmark price, leaving small and medium miners caught in a dilemma of low selling prices and high taxes. An analysis on green transition initiatives points out that profit distribution within the local industrial chain is imbalanced, leading to continuously increasing operational pressure for small and medium mining enterprises.

As the world's largest nickel supplier, Indonesia's export policies and adjustments to mining taxes impact the entire market. Expectations of a tightening in export controls have recently intensified, making supply-side disruptions a key factor for bullish positions. However, the actual implementation strength and timing of these policies remain the most significant variables.

Cost Transmission

The pressure on the ore sector has not been smoothly transmitted downstream. The average spot price for 1# nickel was reported at 129,650 yuan per ton, a decrease of 400 yuan per ton from the previous day, representing a decline of 0.31%.

The average price for nickel sulfate was reported at 33,100 yuan per ton, unchanged from the previous day, with no significant increase in demand from the battery sector. The average price for nickel chloride stood at 39,300 yuan per ton, also showing a flat trend. The widening gap between rising costs and falling prices is continuously squeezing the profit margins for midstream smelting operations.

Inventory and Arrivals

According to a July 14th report, Shanghai nickel inventories decreased by 2,525 tons week-on-week to 99,097 tons, showing signs of destocking. However, absolute inventory levels remain near a high of 100,000 tons, and coupled with expectations for import arrivals, the actual tightness in the near term needs further verification.

The spot price premium over futures was 780 yuan per ton, slightly widening from the previous 720 yuan, reflecting that near-term supply is not abundant. If actual export reductions from Indonesia exceed expectations, the destocking pace may accelerate. Conversely, the arrival of new shipments would likely suppress any further expansion of the premium.

The divergence between the narrative surrounding the ore sector and the reality in the spot market is unlikely to be quickly resolved in the short term. If Indonesia's tax reforms are implemented and push up the cost base, the floor for nickel prices may rise overall. Subsequent attention should focus on miners' production cut dynamics and the pace of domestic arrivals, as the question of when this misalignment will converge remains unresolved.