SHFE nickel futures declined 1.19% to ¥145,280/mt on June 26, tracking LME weakness but with a notable weekly gain of 3.56% that reflects short-term volatility rather than a trend reversal. The Shanghai contract has been range-bound between ¥140,000-150,000/mt for most of June.
China’s stainless steel production grew only 1.8% year-on-year in May, its slowest pace in 18 months. Weakening demand from the property completion cycle and sluggish white goods exports have capped stainless output growth. Tsingshan, China’s largest stainless producer, cut June production guidance by 5%, signaling caution.
The battery-grade segment is the bright spot. Nickel sulfate premiums remain at $1,500-1,800/mt over LME nickel, supported by robust Chinese EV battery production. China produced 1.07 million EVs in May, driving cathode precursor demand. Nickel sulfate inventory at Chinese ports fell to a 6-month low of 8,200 tonnes of nickel content.
Mixed hydroxide precipitate (MHP) imports from Indonesia jumped 35% year-on-year in May, as new HPAL capacity ramped up. Indonesia’s Huayue and QMB projects are now running at 90% capacity, producing nickel-cobalt MHP that feeds directly into Chinese sulfate production. This integration is compressing the sulfate premium.
The SHFE-LME nickel arbitrage window is essentially closed, with the Shanghai contract trading at rough parity after adjusting for VAT and currency. This suggests the Chinese market is in balance, with domestic NPI and imported MHP meeting both stainless and battery demand without needing to pull additional LME stocks.
Nickel buyers face a bifurcated market. Stainless-grade nickel (NPI) is abundant and cheap; battery-grade nickel (sulfate) commands a premium but that premium is shrinking. For stainless steel procurement, the NPI price below $11,000/mt is a hard ceiling for alloy surcharges. For battery procurement, consider diversifying sulfate sources beyond China as Indonesian HPAL capacity may shift trade flows and affect logistics costs.