Impact of Improved US-Russia Relations on Nickel Ore Imports and Exports, and Stainless Steel Market Outlook

With shifting international political dynamics, the potential easing of US-Russia relations could have significant repercussions on the global nickel ore market. Nickel, an essential raw material for both the stainless steel and battery industries, is subject to market fluctuations that directly affect downstream industries. This article explores the potential impacts of improved US-Russia relations on global nickel ore imports and exports, as well as analyzes short-term strategies for the stainless steel market.

1. Impact of Improved US-Russia Relations on Nickel Ore Imports and Exports

1.1 Potential Adjustment of Russian Nickel Export Restrictions

Russia is a key player in the global nickel supply, and its export policies have been influenced by international sanctions. Although President Putin previously suggested limiting nickel exports, this policy has yet to be implemented. However, if US-Russia relations improve, Russia may reconsider its export policy, especially regarding supply to key importers like China.

• Direct Impact: If Russia relaxes its nickel export restrictions, supply to key markets, such as China, could increase, alleviating some of the supply tightness caused by sanctions. For instance, Russian nickel accounted for 7.3% of China’s imported refined nickel in 2024.
• Indirect Impact: If the US lifts sanctions on Russian nickel, particularly the LME delivery restrictions, Russia’s nickel circulation could rebound, exacerbating the global nickel surplus and further suppressing prices.

1.2 Indonesia’s Dominant Role in Nickel Ore Policy

Indonesia is the heart of the global nickel supply, accounting for over 60% of global nickel production. Its nickel ore allocation policy (RKAB) has a more significant impact on the market than Russia’s supply dynamics.

• For 2025, Indonesia’s nickel ore allocation has been set at 247 million tons, a 10% decrease from 2024. If this policy is strictly enforced, nickel ore prices may continue to rise, counteracting the potential increase in Russian nickel supply.
• Although improved US-Russia relations could indirectly influence Indonesia, the Indonesian government still maintains export restrictions to support its domestic nickel industry. Should the US pressure Indonesia to increase production, this could alter global supply expectations.

1.3 Long-Term Pressure on Global Nickel Supply and Demand Balance

Looking ahead, the global nickel market is expected to face a surplus of 120,000 tons in 2025, with supply growth (9.4%) outpacing demand growth (6.5%). Even with increased Russian nickel exports, the global surplus is unlikely to be offset. The expansion of Indonesia’s intermediate product capacity and the decline in the cost of electroplated nickel could continue to limit upward pressure on nickel prices.

2. Can Stainless Steel Be a Bottom-Fishing Opportunity?

2.1 The Link Between Nickel Prices and Stainless Steel Costs

Nickel accounts for about 60% of the production cost of stainless steel, meaning that fluctuations in nickel prices directly impact stainless steel prices. Currently, nickel prices have fallen to around 105,000 CNY per ton, which is close to the integrated cost line for Indonesian hydrometallurgical intermediate products. There is limited room for further price declines. If nickel prices stabilize, it will provide stronger cost support for stainless steel prices.

2.2 Stainless Steel Supply and Demand Outlook

• Supply Side: In 2024, stainless steel production remains high, but weak demand from end industries, particularly the real estate sector, has led to inventory buildup. In 2025, domestic policies may slightly improve demand, but inventory reduction pressures will persist.
• Demand Side: The demand for ternary batteries in the electric vehicle sector has slowed, with lithium iron phosphate batteries accounting for 70% of the market. Traditional stainless steel demand from industries like construction and home appliances is unlikely to experience significant growth. Therefore, stainless steel demand growth in 2025 is expected to remain limited.

2.3 Key Factors to Watch for Bottom-Fishing Opportunities

• Indonesia’s Nickel Ore Policy: If Indonesia further reduces its ore allocation, the potential rebound in nickel prices could drive a short-term increase in stainless steel prices.
• Domestic Macro Policies: The implementation of real estate support policies will directly impact stainless steel demand in the domestic market.
• Inventory Cycles: Currently, stainless steel social inventories are high. Monitoring post-holiday inventory reduction progress and changes in Indonesian nickel pig iron supply will be key.

3. Conclusion and Recommendations

3.1 Nickel Market Outlook

While improved US-Russia relations could briefly boost market sentiment, long-term price movements will still be dominated by Indonesia’s policy. Nickel prices are expected to fluctuate in the range of 100,000-140,000 CNY per ton. Investors should remain cautious of potential market volatility triggered by changes in Indonesia’s allocation policy.

3.2 Stainless Steel Trading Strategy

• Cautious Bottom-Fishing: Stainless steel prices are close to the cost line, but inventory pressures and weak demand limit the potential for a significant rebound. Investors should closely monitor Indonesia’s policy shifts and any signs of demand recovery.
• Range Trading: The nickel price for the Shanghai Futures Market (12.6-13.4 million CNY/ton) and stainless steel (13,300-14,400 CNY/ton) could offer a trading range. Investors should consider entering positions at lower prices while setting stop-loss limits.

In conclusion, bottom-fishing in the stainless steel market should be approached with caution. It’s essential to look for signs of nickel price stabilization and improvements in demand. In the short term, a fluctuating market is expected, so investors should closely monitor Indonesia’s policy and macroeconomic data.

Reference:

1. International Nickel Study Group (INSG) – For official reports and global nickel market updates: https://www.insg.org/

2. World Steel Association (WSA) – For insights into the global steel market: https://www.worldsteel.org/

3. London Metal Exchange (LME) – For detailed information on nickel trading and price movements: https://www.lme.com/

4. Reuters – A reliable source for updates on US-Russia relations and global commodity markets: https://www.reuters.com/

5. Nickel Institute – A great resource for understanding the role of nickel in various industries: https://www.nickelinstitute.org/