Recently, nickel ore prices in both the Philippines and Indonesia have risen significantly. Indonesia saw a simultaneous increase in its benchmark price (HPM) and the market premium, while the Philippine market started its upward trend earlier, with mine offers rising competitively since January. As ore prices climbed, CIF prices for resources shipped from both countries to China and Indonesia also followed higher.
However, SHFE and LME nickel futures have experienced substantial corrections recently due to macroeconomic factors, leading to a notable decline in nickel pig iron (NPI) prices. Faced with persistently rising raw material costs, downstream enterprises in China have generally adopted a cautious stance and shown low willingness to accept high-priced ore.
Factors :
I. Indonesia's policy
On December 19, 2025, the Indonesian Nickel Mining Association (APNI) revealed in an interview that the government plans to reduce the annual nickel ore mining quota to 250 million tonnes in 2026, a significant drop from 379 million tonnes in 2025. This statement was further confirmed by an official from Indonesia's Ministry of Energy and Mineral Resources on January 14, 2026, who indicated that quotas would be adjusted based on smelters' actual production capacity, with the final production likely ranging between 250 and 260 million tonnes.
These developments indicate the Indonesian government's intent to significantly tighten control over domestic mineral resources this year. The policy shift regarding the annual Work Plan and Budget (RKAB) for nickel ore has become a core factor influencing market expectations. This has reinforced market expectations for medium-to-long-term nickel ore supply tightness, subsequently attracting substantial funds to enter the market and driving up futures prices.
Since Indonesia's domestic nickel ore benchmark price (HPM) is linked to LME nickel prices, the rise in nickel prices has been quickly transmitted to the ore segment. Taking nickel ore with a grade of Ni1.6% and Mc35% as an example, the HPM for the first period in February rose to US $31.42/wmt, an increase of approximately $6 from US $25.81/wmt at the end of December.
Source: Mysteel
II. Tight supply expectations and market dynamics
The recent sharp rise in Indonesia's domestic nickel ore premium has been a key driver behind the increase in delivered costs, primarily fueled by two factors. First, strong uncertainty persists regarding future supply, as the approval process for new 2026 RKAB quotas in Indonesia is progressing slowly. Currently, only mines under PT Vale Indonesia have received approval, while most other companies are still operating under three-year quotas approved in 2024, which are set to expire by the end of the first quarter. Second, increased competition in the spot market has emerged. Some plants and traders, anticipating higher ore prices, have accelerated their procurement, amplifying short-term demand and pushing up the overall average negotiated price.
Under these dual influences, spot supply sentiment for nickel ore has continued to tighten, driving Indonesia's domestic premium range for February up by US $3 to $5/wmt (depending on shipping distance). It has now reached a high of US $28 to $32/wmt. Combined with the earlier increase in the benchmark price (HPM), this has led to a surge of approximately US $10/wmt in the landed cost of pyrometallurgical (smelting) ore within a month. Taking ore graded at Ni1.6% Mc35% as an example, its CIF price has risen to US $59-$63/wmt. Prices for hydrometallurgical ore (e.g., Ni1.3% Mc40%) have also generally increased by US $2-$3/wmt, currently quoted at US $25-$30/wmt (depending on distance).
Meanwhile, Philippine mine offers have continued to climb. The latest tender price for Ni1.25% ore from the northern Benguet mine has reached US $39.5/wmt, while FOB prices for Ni1.4% ore from the Eramen mine have risen to US $50-$52/wmt--an increase of over US $10/wmt compared to a month ago. Currently, the CIF transaction price for Philippine Ni1.4% ore imported into the Indonesian market has touched US $61/wmt, and offers to Chinese ports have also risen to the US $60/wmt level (though no transactions have been confirmed at this price).
III. Resilient industrial demand provides fundamental support
The current high level of nickel ore prices is also supported by rigid demand from the downstream sector. On one hand, numerous new nickel projects in Indonesia have recently commenced operations or expanded capacity in 2026, while other projects are nearing completion and start-up. This has generated substantial nickel ore stocking demand across various industrial parks. On the other hand, influenced by factors including changes in China's new energy material export policies, there has been a phase of concentrated export demand for Chinese precursor materials. China's ternary precursor output in January 2026 reached 98,800 tonnes, an increase of 13.05% month-on-month and a significant 68.37% year-on-year. This has boosted production enthusiasm in the upstream smelting segment in Indonesia, providing fundamental absorption capacity for high-priced raw materials through this structural demand.
Source: Mysteel
IV. Weather conditions disrupt imported supply
Amid strong expectations on the demand side, supply has tightened periodically. The Philippine imported nickel ore has served as an important supplement to the Indonesian nickel ore market in recent years. Currently, Surigao, the largest nickel ore shipping region in the Philippines, is in its rainy season, with virtually no ore vessels departing. Only limited shipments are available from the northern Zambales mining area and the southern Tawi-Tawi mining area. Against this backdrop, some market participants, based on their assessment of future supply, have adopted proactive purchasing strategies, thereby driving a rapid increase in FOB offers from Philippine mines in the short term.
Impacts:
As a major cost component in nickel pig iron (NPI) production, the soaring price of nickel ore has directly impacted NPI production margins. According to Mysteel, based on current offers of Philippine 1.4%-grade nickel ore at US $61/wmt CIF to Indonesia or US $60/wmt CIF at Chinese ports, the production cost for high-grade NPI would reach Yuan 1,151/mtu, significantly exceeding the current market price for NPI. Meanwhile, downstream stainless steel producers have limited ability to absorb these high raw material costs, resulting in NPI price increases lagging far behind the rise in feedstock prices. Moreover, NPI prices have recently corrected due to falling nickel prices. Mysteel statistics show the ex-warehouse tax-inclusive price for Indonesian high-grade NPI was Yuan 1,035/mtu on February 5. This situation has pushed most Chinese NPI smelters into immediate production losses and substantially reduced profits for Indonesian NPI producers.
Furthermore, the intense volatility in raw material prices has intensified bargaining across the industrial chain. Upstream miners and traders maintain firm prices based on costs and supply expectations, while midstream NPI smelters, under loss pressure, are generally adopting low-inventory operations and slowing procurement, leading to a widening gap between buyer and seller price expectations. If this standoff persists, it could trigger a reduction in NPI operating rates, subsequently transmitting pressure upstream or further squeezing downstream profits, thereby increasing uncertainty and complexity for the entire industry chain.
Looking ahead, nickel ore prices are expected to remain supported and likely trade within a high range in the first quarter, influenced by factors including the progress of Indonesia's RKAB approvals, seasonally low shipments from the Philippines due to the rainy season, and potential adjustments to ore pricing formulas (such as the inclusion of cobalt credits). Entering the second quarter, the supply is projected to rebound seasonally as the Philippine rainy season concludes. Market focus will then shift to the actual absorption capacity for high-priced nickel ore and the specific implementation of Indonesia's quota policies. Should downstream demand prove insufficient to effectively absorb supply, ore prices may face downward pressure.
In the medium to long term, Indonesia's industrial policies provide solid underlying support for nickel prices. However, the fundamental oversupply in the global primary nickel market persists, which will continue to cap significant price upside. Coupled with uncertainties surrounding the macro monetary environment and the global economic outlook, nickel price volatility may intensify further. The LME nickel price is projected to core within a range of US $16,000-$21,000 per tonne.
Written by Cora Ji, jiruyan@mysteel.com
