SHFE nickel futures rose 3.52% to 154,690 CNY/t on June 19, extending gains as the market digests Indonesia's reduced 2026 nickel ore mining quota. The government confirmed roughly 250-260 million wet tonnes — down sharply from 379 million tonnes in 2025 — as the Prabowo administration prioritizes resource conservation over production volume.
The quota cut is now hitting the feedstock level. Chinese nickel pig iron (NPI) producers, who rely on Indonesian ore imports, report tighter availability. Recent flooding in Sulawesi has further disrupted mining operations, adding near-term supply pressure while ore stockpiles at Chinese ports are already declining.
LME nickel held steady at $17,820/mt. The market continues to differentiate between class-1 nickel (LME-deliverable) and class-2 (NPI, mixed hydroxide precipitate). LME inventories remain elevated around 175,000 tonnes, but the drawdown from December's peak of 250,000 tonnes reflects tightening in the class-1 segment specifically.
The class-1 premium over LME benchmark has edged higher in recent weeks, as battery-grade nickel sulfate producers compete for feedstock with the stainless steel supply chain. Macquarie projects a modest deficit in class-1 nickel for H2 2026, even as the broader market remains in surplus.
Stainless steel buyers should watch the NPI-to-LME spread. If ore constraints push NPI prices higher, stainless surcharges will follow. Battery-material buyers: note the class-1 premium tightening and consider locking in Q4 requirements now. Indonesia policy remains the dominant variable for both.