LME nickel remained subdued on the cash contract at $17,630/mt, but three-month metal traded at $17,830/mt, a $200 contango. The SHFE move was the more significant price action: a 3.52% surge to 154,690 CNY/mt, driven by short-covering and speculative buying as the June contract approached its delivery date.
The SHFE rally outweighed the LME move, reflecting different market structures. SHFE nickel trading volumes surged 45% above the 20-day average, with open interest declining 5%, a classic short-covering signature. The LME-SHFE arbitrage has narrowed, suggesting Chinese end-users were active buyers.
LME nickel stocks rose 786t to 274,938t, the highest level in over a year. Class I nickel inventory continues to build, reflecting the shift in LME deliverable grades. The stock build is concentrated in Rotterdam and South Korean warehouses, predominantly Russian-origin material.
The global nickel market remains bifurcated between Class I (LME-deliverable) and Class II (NPI, MHP, matte) products. Class II supply, dominated by Indonesian production, has grown rapidly and now accounts for over 65% of global nickel output. This structural oversupply of Class II nickel continues to cap price upside for LME nickel.
Nickel remains a two-speed market. Class I LME nickel is capped by inventory builds, while Class II products face different supply dynamics. Buyers sourcing Class II nickel (NPI, MHP) should use different pricing benchmarks than LME. Track Indonesian policy changes as the primary risk factor for nickel supply costs.