Seasonal Supply Crunch Looms as Nickel Fundamentals Shift from Bearish to Bullish

• Nickel prices remain range-bound at around $15,000 per tonne, sitting at the lower end of the $15,000-$15,800 trading range, with LME inventories up 6,000 tonnes but ore prices holding steady despite Chinese pressure
• Indonesian supply control continues as the country acts as OPEC for nickel, having pushed ore prices up ~$3,000 per tonne while Tsingshan maintains high output to squeeze competitors, though this strategy is becoming unsustainable
• Chinese policy shifts toward "involution" - reducing excess capacity to improve profitability - are beginning to support stainless steel and nickel pig iron prices, with the next 2-3 weeks critical before Philippine winter shutdowns
• The Metals Company's PFS shows strong economics but would produce only 100,000 tonnes nickel annually (2% of production) while generating 3 million tonnes manganese (15% of market), raising questions about manganese price impacts and operating costs
• Government funding momentum is accelerating for critical minerals, with examples like MP Materials' DoD contracts and Torngat Metals' $100M+ Canadian financing, as tone has shifted significantly in the last 12 months

The global nickel market is experiencing a complex interplay of supply constraints, policy interventions, and emerging production technologies that are reshaping investment opportunities. Mark Selby, CEO of Canada Nickel Company, provided detailed market insights that illuminate critical trends affecting nickel pricing and supply dynamics. With the market currently navigating range-bound trading and anticipating seasonal supply disruptions, understanding these developments becomes essential for investment positioning.

Current Nickel Price & Market Fundamentals

Nickel prices are currently trading around $15,000 per tonne, positioned at the lower end of the established $15,000-$15,800 trading range. This positioning reflects typical August market doldrums, though underlying fundamentals suggest potential for upward movement.

LME nickel inventories increased by approximately 6,000 tonnes during the recent period, though Selby noted

"[this inventory build remains] nowhere near the kind of inventory-build that is "the reported surpluses."

More significantly, ore prices continue to hold at elevated levels despite sustained Chinese efforts to pressure them downward through market commentary about increased supply prospects.

The most encouraging development has been the recent uptick in both nickel pig iron (NPI) prices and Chinese stainless steel prices. According to Selby, 

"Chinese stainless steel prices are a good sign. If those are starting to move up, then that's a sign that the market might be moving in the right direction." 

This price movement suggests genuine demand recovery rather than speculative positioning.

Indonesian Supply Strategy and Market Control

Indonesia's dominance of global nickel supply continues to be the primary driver of market dynamics. Selby characterized the country as "an OPEC of one country" in nickel and stainless steel markets, emphasizing that 

"The value of nickel and stainless steel matters to the Indonesian economy.”

Indonesian producers have successfully pushed ore prices up approximately $3,000 per tonne to producers, creating significant cost pressure throughout the supply chain. This price manipulation has been facilitated by Chinese company Tsingshan, which has maintained high NPI and stainless steel output while keeping prices low to "squeeze out their competitors."

However, this strategy appears to be reaching sustainability limits. Selby observed that 

"They will need to let somebody make some money, including themselves, making a little more money."

The implication is that current pricing dynamics must evolve to allow broader industry profitability, suggesting upward price pressure as the strategy becomes economically unsustainable.

Chinese Industrial Policy Transformation

China's implementation of "involution" policies represents a fundamental shift in industrial strategy with direct implications for nickel demand. These policies specifically target the reduction of excess capacity across multiple industrial sectors to improve overall profitability and reduce deflationary pressure in the Chinese economy.

As Selby explained, the focus is on recognizing that 

"It doesn't make sense to have all this excess capacity, which is crushing prices, causing deflationary pressure in the Chinese economy and not generating any profit." 

Steel production, including stainless steel manufacturing, is among the targeted sectors for capacity rationalization. This policy shift has already begun supporting stainless steel and NPI prices, with Selby noting that 

"This focus on trimming capacity and helping to make industry overall a little more profitable is great." 

The implementation involves provincial governors competing to demonstrate compliance with national policy directives, creating momentum for actual capacity reductions rather than mere announcements.

Mark Selby, CEO of Canada Nickel Corp

Critical Timing and Seasonal Factors

Selby emphasized that "the next couple weeks are really going to be a key piece" for market direction. All mines are currently operating at close to full capacity, making the next few weeks critical for determining whether Chinese efforts to pressure ore prices will succeed or whether current price levels will hold.

The seasonal element becomes particularly important with Philippine mine shutdowns during winter months. As Selby noted, 

"If they hang in anywhere close to this, for the next 4 to 6 weeks, that sets up an interesting November, December when the Philippines has half of their production shut down (due to rain) and the market is going to be tighter."

This seasonal supply constraint, combined with sustained ore price levels, could create significant upward price pressure during the fourth quarter and into early 2026.

Deep-Sea Mining Development Analysis

The Metals Company's preliminary feasibility study results present both opportunities and challenges for the broader nickel market. While the company reported "big NPV big IR numbers," Selby provided important context regarding actual market impact and operational concerns.

At full production, the operation would produce approximately 100,000 tonnes of nickel annually, which Selby calculated as "about 2% of nickel production" by 2030. This relatively modest contribution to global nickel supply contrasts sharply with the manganese byproduct implications, where the operation would generate approximately 3 million tonnes annually - "about 15% of the manganese market."

Selby raised important questions about operational viability, noting that "the tough thing that I have to see is what the real operating costs of this are going to be, they've never been done before." He also highlighted that the company "would help themselves" by securing validation from "a big engineering firm sign off on what's in one of these reports," suggesting current feasibility studies lack independent verification that major engineering firms typically provide.

Government Funding and Policy Support

Government support for critical mineral projects has accelerated significantly, with recent examples demonstrating a fundamental shift in approach. Selby cited examples including MP Materials' Department of Defense funding and Torngat Metals' "100 plus million bridge financing from Export Development Canada and another Canadian institution."

The strategic rationale centers on supply chain security, particularly given Chinese control of processing capacity. As Selby noted, 

"Nickel in terms of Chinese controlled supplies around 80% [of global processing.]” 

This concentration has prompted government recognition that

"There's been almost no real projects advanced to any scale across a range of minerals. The tone in the last 12 months has fundamentally shifted [and expects] good money come from the government both from the province and the feds this fall."

The government strategy involves providing funding to advance projects through feasibility and construction phases, with the expectation that 

"Once investors see the governments are serious about providing the funding that's going to get these things actually built then that's going to encourage investors to start advancing more projects."

ESG & Stakeholder Engagement

Canada Nickel's approach to ESG reporting exemplifies cost-effective positioning for government support. The company produced what Selby described as "an excellent report" for less than $10,000, comparing favorably to major companies that "probably spend a couple million dollars" on similar documentation.

The strategic value extends beyond cost efficiency to practical business benefits. As Selby explained, 

"How are we able to get through the permitting process in half the time? Well, it's because we actually make it a focus and walk the talk." 

The ESG focus becomes particularly important given that funding sources include "governments in Canada, governments in Europe" and "car companies" where "those issues matter to those groups very significantly."

Investment Implications

The convergence of supply constraints, policy interventions, and seasonal factors creates a potentially favorable environment for nickel price recovery. Selby's outlook suggests prices moving "up into the $18,000 to $20,000 range by the end of this year, early next year" based on Indonesian supply management and Philippine seasonal shutdowns.

The structural changes in Chinese industrial policy, combined with government support for Western critical mineral projects, suggest a rebalancing of global supply chains away from pure cost optimization toward supply security and sustainability considerations.