On August 19, 2026, the Shanghai nickel main contract opened at 129,030 yuan per tonne and settled at 127,850 yuan per tonne, down 0.36% from the prior session's close. Trading volume reached 150,735 lots (up 21,110), while open interest stood at 118,724 lots (down 4,831).

Where the market stands now

Nickel is currently caught between policy shifts and underlying fundamentals. On the policy front, Indonesian regulatory turbulence has entered a period of intense negotiation, with easing expectations gaining traction alongside signals of expanded export oversight. President Prabowo has announced that Indonesia will establish a strategic minerals and commodities exchange as the next phase of its one-stop export policy, slated to begin operations on January 1, 2027, to secure pricing power over key export commodities. Meanwhile, the Indonesian Nickel Miners Association has recommended maintaining the RKAB at 270 million wet tonnes while adding a 30 million tonne buffer quota, fueling market speculation over relaxed allocation limits. The mid-term quota application window has now closed, with further details on additional allocations pending release.

On the supply side, the implementation of the new HPM pricing policy and ongoing tightness in sulfur supply — with prices remaining elevated in the short term — have created a cautious market mood. The MHP segment is seeing a looser supply-demand balance with downward pressure on coefficients, while high-grade matte coefficients remain steady. Expectations for a recovery in high-nickel pig iron supply are strengthening, with markets anticipating increased arrivals in the coming period.

On the demand front, the traditional off-season for stainless steel has left end-user demand subdued, with buyers showing limited appetite for higher-priced materials. Any improvement in transaction volumes has been temporary before fading back to tepid levels. This week, steel mills have softened their price support stance, with spot quotes tracking the visible decline in futures. Finished steel prices have fallen faster than raw materials, significantly compressing mill margins. The cost advantage of scrap stainless steel continues to narrow, diminishing its substitution appeal. In the new energy sector, July production of ternary cathode materials reached 89,220 tonnes, up 2.48% month-on-month, though downstream enterprises remain cautious in purchasing, focusing mainly on essential restocking. Domestic nickel futures inventories have seen some drawdown, but visible stocks remain at historically elevated levels.

Ore market developments

According to Mysteel, Philippine mines have quoted FOB prices of $25 per wet tonne for 1.2% grade ore, $28.5 for 1.25% grade, and $34 for 1.3% grade, while domestic Chinese smelters are purchasing 1.4% grade ore at a CIF price of $57 per wet tonne. In Indonesia, benchmark HPM prices for the second half of August have been raised broadly by approximately $0.6 to $0.9 per wet tonne across various grades, providing marginal strengthening of cost support at the mining end.

Spot market snapshot

Inventories of refined nickel tracked across 27 Chinese warehouses declined by 306 tonnes to 116,783 tonnes, a decrease of 0.26%. Port nickel ore stocks at 14 Chinese ports fell by 275,500 wet tonnes week-on-week to 11.481 million wet tonnes, down 2.34%. The premium for Jinchuan nickel moved 150 yuan per tonne to 1,550 yuan, while imported nickel premiums rose 50 yuan to 100 yuan per tonne. Nickel briquette premiums held at 50 yuan per tonne. In the previous session, SHFE nickel warrants stood at 101,998 tonnes (down 60), with LME nickel inventories at 265,248 tonnes (up 78).

Macro backdrop

The Middle East situation remains volatile, with the UAE announcing a suspension of all trade, commercial, and financial transactions with Iran. US-Iran negotiations have yet to achieve a breakthrough, with shipping lanes remaining a focal point. Sulfur prices continue to hover around $1,100 per tonne (CIF Indonesia).

Strategy outlook

Attention should focus on Indonesia's mid-term RKAB quotas and US inflation trends. While the current supply-demand picture remains weak, it aligns with expectations. Policy and macroeconomic factors are emerging as the primary drivers of nickel prices. Recurring Middle East tensions, tightening Indonesian policy expectations, and a strong US dollar are exerting two-way pressure on nickel prices, making a clear unidirectional move unlikely. Prices are expected to maintain a range-bound pattern. However, should Indonesian RKAB allocations deviate from expectations, significant volatility could ensue. Monitoring Indonesian quota developments and coordinated moves across macro and non-ferrous markets will be essential. For single-leg positioning, range trading is recommended. No recommendations for calendar spreads, cross-commodity spreads, physical-futures arbitrage, or options.

Key risks

Domestic economic policy changes, Indonesian policy shifts, and fluctuating statements from the US President.

Stainless steel market analysis

On August 19, 2026, the stainless steel main contract opened at 14,350 yuan per tonne and closed at 14,260 yuan per tonne, with trading volume of 129,548 lots (down 697) and open interest of 118,612 lots (down 4,171).

Fundamental review

The EU's new steel trade mechanism has taken effect, establishing stainless steel quotas, raising additional tariffs, and implementing "melting and casting" rules of origin. Separately, China's State Council has issued the "15th Five-Year Plan for Urban Renewal," guiding cities toward composite transformation and promoting trillion-yuan investment in urban renewal projects.

On the supply side, mills continue to plan higher production schedules, though with notable divergence across categories. August domestic crude stainless steel output is projected at 3.6914 million tonnes, up 3.11% month-on-month and 11.33% year-on-year. Within this, the 200-series is expected to rise by 171,400 tonnes month-on-month, while the 300-series is projected to decline by 137,000 tonnes. Indonesian stainless steel output in August is estimated to fall 12.7% month-on-month. Overall supply is modestly increasing.

On the demand side, traditional stainless steel-consuming industries remain sluggish, though the pace of decline is moderating. In July, new home prices in first-tier cities fell 1.1% year-on-year, with the decline narrowing by 0.2 percentage points from the prior month. Second-tier cities saw prices drop 2.8% year-on-year, with the decline narrowing by 0.3 percentage points, while third-tier cities recorded a 4.2% decline, unchanged from the previous month. China's fixed-asset investment fell 6.7% year-on-year in the January-July period, and July industrial value-added output grew 4.5% year-on-year and 0.11% month-on-month. Production plans for the three major home appliance categories in August 2026 total 28.33 million units, down 6.3% from actual production in the same period last year. By product, household air conditioner production is planned at 10.73 million units, down 16.7% from last year's actual output; refrigerators at 8.77 million units, up 0.7%; and washing machines at 8.83 million units, up 2.3%. Traditional sectors lack the impetus for large-scale restocking, with demand remaining predominantly need-based.

Spot conditions

While futures fluctuated, spot prices remained relatively stable, with transactions centered on essential procurement and overall volumes staying moderate. The Wuxi market stainless steel price was 14,600 yuan per tonne (unchanged), with Foshan market at 14,600 yuan per tonne (unchanged). The 304/2B premium/discount ranged from 410 to 610 yuan per tonne. According to SMM data, the average ex-works price of high-nickel pig iron including tax fell 1.00 yuan per nickel point to 1,127.0 yuan per nickel point.

Strategy

Supply growth expectations on the fundamental side outweigh demand, though cost support remains intact. Macro and policy influences are becoming the primary drivers for stainless steel. In the near term, stainless steel will continue to track nickel price movements and is expected to maintain a range-bound pattern. A neutral stance is recommended for single-leg positions, with no recommendations for calendar spreads, cross-commodity spreads, physical-futures arbitrage, or options.

Key risks

Changes in domestic economic and real estate policies, Indonesian policy shifts, and fluctuating statements from the US President.