[SMM Analysis] Indonesia’s RKAB Supplemental Quota Disruption Caused Wild Swings in Nickel Prices This Week

This week, nickel prices experienced wild swings dominated by Indonesia's RKAB supplementary quota policy. At the start of the week, nickel prices were in the doldrums, pressured by progress in US-Iran negotiations and growing expectations for the reopening of the Strait of Hormuz. Mid-week, news that a major mine had been approved for additional RKAB quotas ignited the market, sharply intensifying expectations of ample supply and sending SHFE nickel down to 127,460 yuan/mt. On Friday, Indonesia's Minister of Energy and Mineral Resources stated that "the quota additions circulating in the market have not been approved," prompting a rebound in futures from the deep losses, with SHFE nickel recovering to 129,000-130,000 yuan/mt. In the spot market, the average price of SMM #1 refined nickel was 131,360 yuan/mt this week, down 2,700 yuan/mt WoW. Jinchuan nickel cathode premiums remained stable this week at 1,100-1,200 yuan/mt. Mainstream electrodeposited nickel discounts were in the range of -200 to -400 yuan/mt, with electrodeposited nickel discounts narrowing. Spot market transactions recovered this week compared to last week, but overall purchasing sentiment remained subdued.

The July US Fed meeting kept rates unchanged as expected, but its overall stance leaned hawkish, putting broad pressure on commodity valuations, with the base metals sector weakening collectively. A US Fed governor stated that if inflation fails to pull back, further policy tightening may be inevitable. The US-Iran situation showed a pattern of "détente first, then relapse." Early in the week, US-Iran negotiations continued to send signals of easing, and expectations for the Strait of Hormuz reopening rose. Trump said he was negotiating with Iran, with talks divided into two phases: the strait's opening and denuclearization. However, the situation later took a new turn—Iran's passage regulations for the Strait of Hormuz banned vessels from the US, Israel, and other hostile nations. A provisional strait transit agreement drafted by Iran and Oman also faced dual obstacles from US sanctions and insurance issues, leaving the strait's full reopening mired in resistance. Domestically, China’s July manufacturing PMI data indicated weak economic recovery momentum.

On the inventory side, the Shanghai Bonded Zone inventory stood at approximately 1,400 mt this week, down 300 mt WoW. China's social inventory was around 133,000 mt, with a WoW buildup of approximately 2,000 mt.

Nickel prices are currently in a state of high uncertainty, where policy expectations are swinging wildly, macro headwinds and geopolitical risks intertwine. They are expected to maintain wild swings in the short term, with the most-traded SHFE nickel contract trading range at 125,000-133,000 yuan/mt.