Nickel Supported by Ore Tightness and Indonesia HPAL Shutdowns - Stainless Steel Morning Brief

London Metal Exchange (LME) base metals showed mixed performance, while both domestic and international nickel ore prices remained stable, and nickel pig iron (NPI) prices held steady. On the supply side, the core driver continues to be Indonesia’s policy stance on nickel ore supply. The government's tightening approach toward mining quotas remains unchanged, and the likelihood of a meaningful increase in RKAB quotas during the first half of the year appears limited. As a result, short-term nickel ore availability remains constrained, providing clear support to upstream prices.

At the same time, the continued rise in sulfur prices has kept smelting costs elevated across multiple processing routes, further reinforcing cost support for nickel. Adding to the supply concerns, four HPAL nickel plants in Indonesia were forced to suspend operations following a landslide incident in February. These facilities collectively account for approximately 30% of Indonesia's HPAL capacity. Indonesian authorities have since warned that the plant involved could face the revocation of its environmental permit, signaling potentially tighter regulatory oversight for the country's nickel industry.

Taken together, the current market structure suggests that nickel prices are likely to maintain a volatile but gradually firming trend in the near term, with downside support remaining relatively strong.

From a broader market perspective, news of the fatal incident and the subsequent shutdown of four HPAL plants has strengthened expectations of tighter nickel supply. As a result, Shanghai nickel futures and stainless steel prices both moved higher.

However, attention is also shifting to the supply outlook for stainless steel. Production schedules released by Chinese mills indicate a significant increase in output planned for March, which may lead to rising inventory pressure once material begins arriving in the market. Whether this additional supply can be absorbed will largely depend on the pace of downstream procurement recovery and the strength of real demand.

In the short term, supported by mills' efforts to maintain pricing discipline, stainless steel spot prices are expected to continue trading at relatively elevated levels within a range-bound market.