In the nickel futures market, a combination of hawkish macro surprises and structural divergence within the industry chain led to a 0.13% decline in overnight LME nickel. The latest LME nickel settlement was $18,555, down $25 per tonne from the previous session, with a trading volume of 6,173 lots. On the domestic front, the overnight Shanghai nickel contract settled at 142,660 yuan per tonne, up 600 yuan or 0.42%.
According to the London Metal Exchange (LME), nickel inventories on May 18 stood at 275,562 tonnes, a decrease of 216 tonnes from the previous day.
The Shanghai nickel futures market opened higher across the board today. The main contract for June 2026 (2606) opened at 142,590 yuan per tonne, up 530 yuan from the previous close. By 9:10 AM, the main contract was trading at 143,360 yuan per tonne, an increase of 1,300 yuan. Shanghai nickel futures opened strong and maintained high levels during the session. On the macro front, overnight LME nickel weakened significantly due to diminishing expectations for Fed rate cuts, profit-taking from earlier positions, and pressure from high overseas inventories. Concurrently, easing geopolitical risks in the Middle East helped restore market sentiment, while a decline in the US dollar index overnight provided support for commodities, contributing to a slight opening gain for Shanghai nickel. However, the domestic stainless steel industry has entered its traditional off-season, with weak downstream demand ultimately capping the upside for nickel prices.
Divergence in the nickel supply-demand landscape is intensifying. A clear split is evident on the raw materials front: Indonesia has significantly reduced nickel mining quotas, and slow approval processes are leading to persistently tight supply. Meanwhile, ore output from the Philippines has recovered notably after the rainy season, partially alleviating global supply pressure. Structural imbalances exist in the supply of both laterite and sulfide nickel ores, with high-grade ore resources becoming increasingly scarce.
The market for nickel intermediates is experiencing weakness on both supply and demand sides. Nickel-cobalt hydroxide (MHP) production has been affected by sulfur supply shortages in the Middle East, forcing several hydrometallurgical plants in Indonesia to cut output. The relative economic appeal of high-grade matte nickel has increased, but actual transactions remain limited due to compatibility issues with downstream production lines. In the recycled nickel sector, rising recovery costs and slower-than-expected growth in the supply of raw materials like electroplating sludge and used batteries are presenting challenges.
Short-term market focus will be on speeches from Federal Reserve officials and US initial jobless claims data. If the data indicates a cooling labor market, it could strengthen expectations for interest rate cuts, providing upward momentum for nickel prices. Technically, nickel prices are in a short-term adjustment phase, with key support around 143,000 yuan per tonne and resistance near 145,000 yuan per tonne.
Nickel prices are expected to maintain a range-bound but slightly stronger pattern in the near term, supported firmly by raw material cost floors below, while capped above by weak off-season consumption and inventory pressures. Investors should closely monitor changes in Indonesia's mining policies and the recovery of sulfur supply.