SMM, March 17: Reviewing February, nickel prices overall fluctuated upward, especially on the second trading day after the holiday—February 6—when SHFE nickel main contract surged over 3% intraday, recording a significant bullish candlestick and continued to rise for three consecutive trading days. By February 10, SHFE nickel main contract reached an intraday high of 127,950 yuan/mt, marking a new high since January 22, 2025. By February 28, SHFE nickel main contract closed at 126,650 yuan/mt, up 2.08% MoM. However, entering March, driven by the continuous pullback of the US dollar index, improving domestic macro front, tight nickel ore supply, and capital favour, SHFE nickel prices continued to rise, reaching an intraday high of 135,960 yuan/mt on March 14, a new high since October 14, 2024.
For LME nickel, it also fluctuated upward in February. By the end of February, LME nickel closed at $15,590/mt, up 2.51% MoM.
Spot Market:
According to SMM spot quotations, SMM 1# refined nickel saw a significant increase right after the Chinese New Year holiday but slightly pulled back afterward. By February 28, the average spot price of SMM 1# refined nickel was 127,200 yuan/mt, up 2,300 yuan/mt or 1.84% from early February's 124,900 yuan/mt.
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Fundamentals
Supply Side:
According to SMM survey, in February 2025, national refined nickel production decreased by 5.69% MoM but increased by 15.12% YoY. The industry's operating rate was 52%, lower than the previous month. The main reasons were the Chinese New Year holiday and fewer calendar days in February, leading to a decline in production. In March, with the holiday impact largely eliminated, demand is expected to recover to normal levels. Under the supply surplus, March production is expected to increase by 13.56% MoM and 29.16% YoY.
Cost Side:
According to SMM survey, in February, the nickel market saw strong cost-side support due to several factors: rainy weather affecting mining progress, higher moisture content in ores increasing transportation costs per unit of effective value, and reduced land transport efficiency during the rainy season. Additionally, the risk of ore liquefaction during the rainy season, which could cause vehicle overturns, further raised transportation costs.
According to SMM survey, transaction prices in the Indonesian domestic laterite nickel ore market rose both MoM and YoY in February. On the supply side, the rainy season in Sulawesi's main mining areas and the SIMBARA system's crackdown on "non-compliant" nickel ore tightened the supply rhythm of Indonesian nickel ore. Furthermore, rising local fuel costs in Indonesia pushed up transportation costs, accelerating the increase in nickel ore premiums. On the demand side, after February's restocking, downstream pyrometallurgy smelters' inventories moved away from the pre-holiday dangerous level of less than one month's stock, but restocking was still incomplete. Active raw material procurement also boosted market sentiment to some extent. For wet-process ore, the continuous ramp-up of MHP projects in H1 and the commissioning of new projects in Q3 and Q4 created a mismatch between downstream demand for wet-process ore and insufficient market circulation, causing wet-process ore prices to rise faster than pyrometallurgy ore.
Additionally, in 2025, Indonesia introduced a series of new resource-related policies. On February 24, Indonesia's Ministry of Energy and Mineral Resources (ESDM) issued the "Guidelines for Setting Benchmark Prices for Metal Minerals and Coal Sales," clarifying the benchmark price formulas for eight nickel-related products. This conveyed the government's intention to control nickel ore and downstream nickel product prices through HPM price adjustments. Coupled with market caution regarding the uncertainty of the annual RKAB policy, subsequent policy directions are expected to significantly impact nickel ore and other Indonesian nickel product prices.
In summary, SMM expects Indonesian ore prices to fluctuate upward in the short term, with a focus on the specific changes in market circulation brought by the end of Sulawesi's rainy season. In the medium and long-term, the tight supply rhythm of nickel ore is likely to persist throughout the year.
Inventory:
According to SMM data, in February, SMM refined nickel social inventory showed an initial increase followed by a decrease, but the overall trend remained an inventory buildup. By February 28, SMM refined nickel social inventory totaled 45,456 mt, up 4,183 mt or 10.13% from 41,273 mt on January 24.
The main reason was that although refined nickel production in February decreased compared to January, demand recovery after the holiday fell short of expectations. Demand for refined nickel in downstream sectors such as batteries, electroplating, and stainless steel did not show significant improvement compared to the previous month. Therefore, overall inventory in February exhibited an inventory buildup trend.
Downstream Consumption:
In the stainless steel sector, a major downstream consumption area for nickel, total production in February increased by 0.1% MoM and 15% YoY. After the Chinese New Year, stainless steel production enthusiasm was high. Production across different stainless steel series varied: 200-series production decreased by 5.9% MoM, while 300-series and 400-series increased by 1.2% and 6.5%, respectively. According to SMM survey, upstream stainless steel supply remained high in February, but market supply and demand were still weak. Some steel mills resumed production after the holiday, but overall supply was limited. Market recovery was slow, with weak downstream operating rates and order volumes, leading to inventory buildup in stainless steel.
In the new energy sector, SMM ternary cathode precursor production in February was approximately 58,000 mt, down 14% MoM and 6% YoY. The significant decline in February production was mainly due to extended shutdowns and recovery periods faced by manufacturers. In March, considering the higher number of calendar days and the resumption of production by manufacturers, ternary cathode precursor production is expected to increase MoM.
Overall, nickel prices in February fluctuated upward. At the beginning of the month, post-holiday demand recovery fell short of expectations, weighing on nickel prices. Combined with the unchanged global nickel supply surplus, nickel prices faced pressure and pulled back mid-month. By month-end, with tight Indonesian nickel ore supply, rising domestic premiums, and higher nickel pig iron transaction prices, nickel prices regained support.
SMM Outlook
Looking ahead to March, SMM expects the impact of the Chinese New Year holiday to be largely eliminated, with refined nickel production likely to increase significantly by about 29% YoY. On the demand side, overall downstream demand in March is expected to improve compared to February, which was affected by the holiday. However, demand may still fall short of production, leading SMM to anticipate an inventory buildup in the refined nickel market in March.
On the mining side, Indonesia's Ministry of Energy and Mineral Resources' new policy adjusted the HPM pricing method, which, although not directly affecting nickel smelters, caused some market sentiment disturbances. The rainy season in the Philippines is nearing its end, and nickel ore supply is expected to increase, but current shipments remain tight, keeping nickel ore prices stable and slightly strong. Therefore, in the short term, nickel ore prices are expected to remain strong. As the impact of subsequent Indonesian policy speculation on the market gradually diminishes, with weak demand and cost support, nickel prices are expected to fluctuate upward. Continued attention is needed on changes in nickel ore supply rhythm and their potential support for prices.
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