On March 19, the nickel in the SHFE nickel market witnessed notable changes. By the close, the most-traded SHFE nickel contract 2605 settled at Yuan 131,550/tonne, down 2.94% for the day, after briefly breaking below the Yuan 130,000 threshold during the session to hit a low of Yuan 129,820/tonne.
For capital flow, the SHFE nickel market recorded a net outflow of Yuan 611 million on the day, with open interest declining by 11,471 lots to 186,756 lots, which indicated an increase in the willingness of funds to exit the market. Meanwhile, LME 3M nickel closed at US $16,620/tonne, down 3.15%.
During the night trading session, SHFE nickel prices rebounded to Yuan 134,050/tonne, reflecting that underlying fundamentals continue to provide some support, with supply-demand imbalances remaining pronounced.
Source: Mysteel
Amid escalating geopolitical tensions in the Middle East, market concerns over a potential global economic downturn rapidly intensified and placed the non-ferrous metals complex under broad pressure. Meanwhile, the continued strength of the U.S. dollar index further weighed on non-ferrous metal prices.
Regarding the recent price decline, two prevailing interpretations have emerged in the market: one views it as a necessary correction following the excessive gains in certain commodities earlier, with overvalued assets facing downward adjustment pressure; the other interprets it as an early warning signal of broader macroeconomic headwinds and suggests that if recessionary expectations gradually materialize, ferrous and non-ferrous metals may enter a prolonged period of gradual decline.
Notably, the Federal Reserve's FOMC economic projections revised GDP growth forecasts upward across the board in March, while also raising core PCE inflation expectations for 2026 and 2027--with the latest median projections now at 2.7% and 2.2%, respectively, higher than the 2.5% and 2.1% forecasted in December. These heightened inflation expectations have further reinforced market concerns regarding sustained tight monetary policy.
The impact of Indonesia's RKAB nickel ore quota approvals is becoming increasingly evident. As of mid-March, Indonesia's Ministry of Energy and Mineral Resources (ESDM) has approved over 100 million tonnes of nickel ore quotas for 2026, still a significant gap from the full-year target of 250 million to 260 million tonnes. This indicates a lag in the approval process.
Notably, Weda Bay Nickel's 2026 production quota has been substantially reduced to 12 million tonnes, a decline of more than 70% compared to its 2025 quota of 42 million tonnes. As a major producer in Indonesia's core nickel mining region, this quota reduction will directly decrease global nickel ore supply by approximately 13%.
Looking at production data, total nickel pig iron (NPI) production in China and Indonesia during January and February 2026 reached 303,800 tonnes, a year-on-year decline of 7.25%. Among this, medium- to high-grade NPI nickel production totaled 292,600 tonnes, down 7.49% year-on-year.
Source: Mysteel
Meanwhile, raw material costs continue to rise. According to Mysteel, as of March 19, lateritic nickel ore CIF prices continued to rise, with Ni:1.3% ore quoted at US $66/wmt and Ni:1.5% ore at US $78-81/wmt. Indonesian domestic nickel ore prices strengthened in tandem, with Ni:1.6% ore market prices (CIF) reported at US $68-76/wmt.
Source: Mysteel
Additionally, potential risks within the supply chain cannot be overlooked. Should the situation in the Middle East remain unstable, disrupted shipping through the Strait of Hormuz would directly impact global sulfur supplies. Indonesia, as the world's largest nickel producer, relies on the Middle East for approximately 75% of its sulfur imports--a critical feedstock for Mixed Hydroxide Precipitate (MHP) production via the High-Pressure Acid Leach (HPAL) process.
Data indicates that around 75% of Indonesia's sulfur imports originate from the Middle East (Saudi Arabia, Qatar, the UAE, and Kuwait). In 2025, Indonesia imported approximately 3.947 million tonnes of sulfur from these four Middle Eastern nations, up 55% year-on-year.
Sulfur serves as a core raw material in the HPAL process for MHP production, with each tonne of nickel in MHP requiring 8-10 tonnes of sulfur. Based on current Indonesian sulfur CFR prices (US $545/tonne) as of March 19, sulfur-related costs are estimated to exceed US $4,900/tonne of nickel, accounting for more than one-third of total production costs.
Currently, sulfur inventories at Indonesian HPAL plants are generally sufficient to sustain only one to two months of production. This implies that if maritime shipping disruptions remain unresolved by mid-to-late April, the nickel production sector could face substantial production reductions--potentially triggering a supply-driven rally in nickel prices.
Based on the results of Mysteel's survey on the 19th, the volatility in nickel prices presented buying opportunities in the market. Driven by futures market profits, NPI traders may reduce spot prices, creating a temporary procurement chance for stainless steel mills. Meanwhile, producers of nickel sulfate and ternary cathode materials could take a forward-looking approach: if sulfur supply issues escalate in late April and push nickel prices higher, they could opportunistically lock in prices for MHP in the near term to hedge against potential increases in raw material costs.
Written by Cora Ji, jiruyan@mysteel.com
