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Nickel Market Poised for Recovery as Supply Dynamics Shift
Recording date: 5th August 2025
The global nickel market stands at a critical juncture as prices hover around $15,000 per tonne, positioned at the lower end of the established $15,000-$15,800 trading range. Despite recent inventory increases of 6,000 tonnes on the London Metal Exchange, underlying market fundamentals suggest potential upward momentum driven by strategic supply management and policy shifts across key producing regions.
Indonesia's dominance as the world's primary nickel supplier continues to shape global pricing dynamics, with the country effectively acting as "an OPEC of one country" for nickel markets. Indonesian producers have successfully pushed ore prices up approximately $3,000 per tonne, creating significant cost pressures throughout the supply chain. However, this aggressive pricing strategy, facilitated by Chinese company Tsingshan's high-output, low-price approach to squeeze competitors, appears to be reaching sustainability limits as market participants recognize the need for broader industry profitability.
China's implementation of "involution" policies - designed to reduce excess industrial capacity and improve profitability - represents a fundamental shift in industrial strategy with direct implications for nickel demand. These policies specifically target steel production, including stainless steel manufacturing, where overcapacity has created deflationary pressure. Early signs of this policy impact are already visible, with recent upticks in both nickel pig iron and Chinese stainless steel prices indicating genuine demand recovery rather than speculative positioning.
The next few weeks prove crucial for market direction, as all major mines operate at near-full capacity while Chinese efforts to pressure ore prices continue. The seasonal element becomes particularly significant with anticipated Philippine mine shutdowns during winter months, potentially creating substantial supply constraints during the fourth quarter.
Government support for critical mineral projects has accelerated dramatically, exemplified by MP Materials' Department of Defense contracts and Torngat Metals' $100+ million Canadian government financing. This shift addresses supply chain security concerns, particularly given Chinese control of approximately 80% of global nickel processing capacity.
The convergence of these factors - Indonesian supply management, Chinese capacity rationalization, seasonal constraints, and government intervention - creates conditions supporting price recovery toward the $18,000-$20,000 range by year-end.
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By Crux InvestorRecording date: 5th August 2025
The global nickel market stands at a critical juncture as prices hover around $15,000 per tonne, positioned at the lower end of the established $15,000-$15,800 trading range. Despite recent inventory increases of 6,000 tonnes on the London Metal Exchange, underlying market fundamentals suggest potential upward momentum driven by strategic supply management and policy shifts across key producing regions.
Indonesia's dominance as the world's primary nickel supplier continues to shape global pricing dynamics, with the country effectively acting as "an OPEC of one country" for nickel markets. Indonesian producers have successfully pushed ore prices up approximately $3,000 per tonne, creating significant cost pressures throughout the supply chain. However, this aggressive pricing strategy, facilitated by Chinese company Tsingshan's high-output, low-price approach to squeeze competitors, appears to be reaching sustainability limits as market participants recognize the need for broader industry profitability.
China's implementation of "involution" policies - designed to reduce excess industrial capacity and improve profitability - represents a fundamental shift in industrial strategy with direct implications for nickel demand. These policies specifically target steel production, including stainless steel manufacturing, where overcapacity has created deflationary pressure. Early signs of this policy impact are already visible, with recent upticks in both nickel pig iron and Chinese stainless steel prices indicating genuine demand recovery rather than speculative positioning.
The next few weeks prove crucial for market direction, as all major mines operate at near-full capacity while Chinese efforts to pressure ore prices continue. The seasonal element becomes particularly significant with anticipated Philippine mine shutdowns during winter months, potentially creating substantial supply constraints during the fourth quarter.
Government support for critical mineral projects has accelerated dramatically, exemplified by MP Materials' Department of Defense contracts and Torngat Metals' $100+ million Canadian government financing. This shift addresses supply chain security concerns, particularly given Chinese control of approximately 80% of global nickel processing capacity.
The convergence of these factors - Indonesian supply management, Chinese capacity rationalization, seasonal constraints, and government intervention - creates conditions supporting price recovery toward the $18,000-$20,000 range by year-end.
Sign up for Crux Investor: https://cruxinvestor.com