Stainless Steel Futures Hit Limit Up! Analysis of the Driving Forces Behind the Rally
Recently, tightening expectations for nickel ore supply in Indonesia have boosted market sentiment. During the night trading session, the price of Shanghai Nickel surged to the daily limit of ¥147,720 per tonne, driving a sharp rally in stainless steel futures. In the afternoon, the most active stainless steel contract 2603 hit the daily limit at ¥14,025 per tonne.
Frequent News on Nickel Ore Quotas: Expected Supply Shortfall Fuels Price Hikes of Nickel and Stainless Steel
Since news emerged late last year that the Indonesian government plans to cut nickel ore mining quotas in 2026, nickel prices have been on an upward trajectory, driving stainless steel futures prices to break through the ¥13,000-per-tonne mark in tandem. Subsequently, as the positive sentiment gradually faded, futures prices retreated slightly and stabilized. However, after the holiday, Vale Indonesia announced that its nickel ore RKAB quota has not yet been officially approved, leading to a temporary suspension of mining activities. This has reignited market concerns over raw material supply in 2026. According to the Indonesian government’s Annual Work Plan and Budget (RKAB), the target nickel ore mining quota for 2026 is approximately 250 million tonnes, a one-third reduction from the 379 million tonnes quota in 2025. Affected by this, nickel and stainless steel prices continued their rebound after the holiday, hitting their highest levels in nearly 18 months and triggering limit-up moves intraday—the first such occurrence since 2022. Overall, market worries about the knock-on effects of reduced nickel ore quotas on ferronickel supply and prices have been the primary driver of this round of rallies in nickel and stainless steel markets.
Sentiment Battles for Pricing Power; Costs to Dominate Price Range
It is worth noting that the sustained price strength before the holiday was mainly driven by raw material-related news and pre-holiday stocking demand. However, after the holiday, pricing power in the market has gradually tilted toward sentiment-driven factors. Following the initial price rally at the end of last month, the market anticipated stocking activities ahead of the New Year holiday. The price increases spurred inventory replenishment demand, keeping spot prices on a firm footing before the holiday. Post-holiday, heightened geopolitical tensions have fueled risk aversion, lifting both precious metals and non-ferrous metals sectors.
According to Mysteel statistics, the price of high-grade ferronickel rose by ¥30 month-on-month to ¥950–960 per nickel unit today. Mysteel’s calculations show that the smelting cost of 304 cold-rolled stainless steel using externally purchased high-grade ferronickel stands at ¥13,366 per tonne, with a profit margin of 4.37% and a profit of ¥584 per tonne. Disrupted by nickel ore-related news, ferronickel prices have followed suit and risen, pushing up stainless steel production costs and strengthening the price correlation between ferronickel and stainless steel. Once the positive news is fully priced in, costs are expected to underpin the operating range of stainless steel prices.
Conclusion
Currently, driven by nickel ore-related news, the synchronized price hikes of nickel and stainless steel have bolstered strong bullish sentiment in the market. However, it is important to note that actual demand has not shown a significant improvement, with speculative demand remaining the dominant force in market transactions. The 250 million tonnes nickel ore RKAB quota for 2026—still pending approval—continues to be the key factor influencing market sentiment. If the Indonesian government maintains a tough stance on nickel ore quotas, concerns over raw material supply before the Spring Festival holiday will likely sustain the upward price trend. On the other hand, as the impact of the news subsides, the overextended portion of stainless steel price gains will gradually correct. Nevertheless, pre-Spring Festival stocking demand is expected to peak in January, which may continue to support stainless steel prices in a firm and volatile trend in the short term.