July 20 Morning Meeting Notes
Market Hot Topics:
The Ministry of Finance, the General Administration of Customs, and the State Taxation Administration issued an announcement adjusting the consumption tax policy for certain batteries: For mercury-free primary cells, metal hydride nickel storage batteries (i.e., nickel-hydrogen storage batteries), lithium primary cells, lithium-ion storage batteries, and all-vanadium flow batteries, a consumption tax at the rate of 2% will be levied from September 1, 2026, with the rate adjusted to 4% from September 1, 2027. For solar cells, a consumption tax at the rate of 2% will be levied from April 1, 2027, with the rate adjusted to 4% from April 1, 2028. In addition, from September 1, 2026 to December 31, 2028, consumption tax is exempted for sodium-ion batteries, solid-state batteries, fuel cells, as well as perovskite solar cells, tandem solar cells, and gallium arsenide solar cells.
Macro:
(1) Iran claimed that the Strait of Hormuz will not reopen due to US pressure; separately, foreign media reported that Iran has secretly ordered the Houthis to blockade the Bab el-Mandeb Strait if the US attacks its power facilities.
(2) Central Bank: The total cumulative increase in social financing scale for H1 2026 reached 20.084 trillion yuan, 2.02 trillion yuan less than the same period last year. At end-June, the broad money (M2) balance was 356.71 trillion yuan, up 8% YoY.
Spot Market:
On July 17, SMM #1 refined nickel prices fell by 100 yuan/mt from the previous trading day. In terms of spot premiums, Jinchuan #1 refined nickel averaged 1,750 yuan/mt, down 250 yuan/mt from the previous trading day, and domestic mainstream brand electrodeposited nickel was in the range of -300-500 yuan/mt.
Futures Market:
The most-traded SHFE nickel contract (2609) plunged sharply in early trading, closing the morning session at 129,450 yuan/mt, down 1.14%.
Supported by macro, policy, and cost-side factors, along with strengthening technicals, nickel prices have momentum for a rebound, but weak demand and high inventories continue to cap upside room. In the short term, the most-traded SHFE nickel contract price is expected to run in the range of 127,000-133,000 yuan/mt.
Nickel Sulphate
As of end-Friday, the SMM average price for battery-grade nickel sulphate edged down.
Demand side, being mid-month, downstream enterprises still hold raw material inventories and exhibit weak sentiment for stockpiling, showing low acceptance of nickel salt prices; supply side, on one hand, some recycling enterprises are seeking to make shipments mid-month, and on the other, current MHP payables and auxiliary material prices remain high, while some producers have expectations for production cuts, which is expected to accelerate the overall market destocking process. Looking ahead, the market is expected to focus primarily on destocking this month, with nickel sulphate prices under pressure.
Inventory side, this week, the inventory index of upstream nickel salt smelters fell from 9.5 days to 9.3 days, the inventory index of downstream precursor plants fell from 11.7 days to 10.6 days, and the inventory index of integrated enterprises remained at 8.1 days. In terms of buying and selling strength, this week, the Willingness to Sell Sentiment Factor of upstream nickel salt smelters remained at 1.8, the purchase sentiment factor of downstream precursor plants remained at 2.5, and the sentiment factor of integrated enterprises remained at 2.4. (Historical data can be accessed by logging into the database.)
NPI
The SMM 10-12% high-grade NPI average price fell 3.1 yuan/nickel unit WoW to 1,129.4 yuan/nickel unit (ex-factory, tax included), and the average Indonesian NPI FOB index price fell $0.47/nickel unit WoW to $145.76/nickel unit. This week, the high-grade NPI spot market was in a state of deep supply-demand gaming throughout, with diverging bullish and bearish expectations continuing to widen. Overall trading was sluggish, and bulk fixed-price purchases by steel mills were absent. Demand side, dragged by the traditional July off-season for stainless steel, weakening end-user product prices directly suppressed NPI prices. Coupled with multiple reductions in steel scrap prices, the substitution advantage of furnace charge re-emerged, diverting essential NPI procurement demand. Downstream players generally held bearish views on the market outlook, continuously pushing down their psychological purchase price levels. Most enterprises chose to consume their own inventories and postpone proactive purchases, and market acceptance of high-priced cargoes was extremely low. Supply side, the overall market exhibited structural divergence. In the short term, available spot cargoes were tight at certain stages, and combined with smelting cost support, most suppliers showed strong willingness to hold prices firm. Some traders adjusted their quotes in line with futures fluctuations. Meanwhile, most enterprises quoted based on an average price plus premium model, with very few offering fixed prices. Additionally, many market participants suspended offering altogether due to unclear market trends, leading to a contraction in effective offer volumes. With the recent typhoon impact ending, concentrated arrivals at ports slightly eased the tight spot supply, prompting an increase in low-price inquiries and driving the price center lower. Meanwhile, the recovery in futures and the lack of a significant recovery in overall production provided bottom-side support for spot prices, limiting the extent of the decline. Overall, this week saw bullish and bearish factors counterbalance each other, with the psychological price spread between upstream and downstream players remaining difficult to narrow. The market continued to exhibit a sluggish, range-bound stalemate and consolidation pattern. Notably, according to market sources, the commissioning pace of aluminum smelting in Indonesia may fall short of expectations, and in H2 2026, the electricity squeeze on high-grade NPI production could ease.
Stainless Steel
This week, the stainless steel market exhibited a pattern of “firm spot prices, declining inventories, and recovering profits.” On the macro front, the US CPI pulled back and inflation expectations cooled. Coupled with the Indonesian Ministry of Energy and Mineral Resources’ clarification that the year’s nickel ore quota would only be moderately and slightly increased, with limited growth, the tight raw material supply pattern persisted. SHFE nickel and SS futures stopped falling and rebounded, helping spot prices consolidate at lows. Spot and inventory side, mainstream steel mills held prices firm, and with typhoons disrupting logistics and arrivals falling short, the recovery in transactions and reduced arrivals reinforced each other, leading to significant social inventory destocking and temporarily easing off-season inventory buildup pressure. However, in the context of the traditional consumption off-season, end-user demand was weak, and downstream users were not accepting high prices; spot price increases significantly lagged futures. Cost and profit side, product and raw material trends diverged: steel mills continued to push for lower raw material prices, with high-grade NPI procurement prices weak and the cost center shifting downward; while product prices, supported by firm offers and transactions, drifted higher. The widening price spread drove a notable expansion in smelting profit margins, strengthening profit resilience and easing production-side pressure. Overall, tight nickel resource expectations provided a floor for the industry, steel mills’ price holding cemented the price center, off-season restocking and logistics disruptions facilitated destocking, and weak raw materials amplified mill profits. However, the core contradiction of weak rigid demand and poor acceptance of high prices has not fundamentally improved, and spot prices lack the momentum for sustained sharp gains.
This week, stainless steel product prices and production costs both drifted higher, with product gains outperforming raw materials overall, driving a WoW expansion in steel mill smelting profits. Based on 304 cold rolling calculations, the profit margin using current raw materials was 2.39%, while using inventory raw materials it was 1.07%, with spot profit resilience having significantly recovered. From the raw material production cost perspective, the cost of producing stainless steel entirely from stainless steel scrap was about 14,351.25 yuan/mt, while the cost using only high-grade NPI reached 14,947.08 yuan/mt, maintaining a notable cost spread.
Nickel ore:
Philippine market:
Price-wise, Philippine nickel ore market prices remained generally stable this week, but as ore supply continued to increase and downstream procurement demand was weak, market sentiment further weakened. Current CIF China quotes were about $46.25/wmt for Ni 1.3% ore, $56.50/wmt for Ni 1.4%, and $64.50/wmt for Ni 1.5%, all flat from the previous week. Currently, the price spread between Ni 1.3% and Ni 1.4% ore remained around $10/wmt. Although the nickel grade difference is only 0.1 percentage points, Ni 1.4% ore provides about 7%–8% more recoverable nickel metal content, with higher smelting efficiency and lower unit nickel production costs. Meanwhile, sea freight, port handling and logistics costs are largely fixed, making higher-grade ore more economical on a per-unit nickel cost basis. Amid ongoing pressure on NPI smelting profits, downstream procurement remained primarily focused on ore with Ni 1.4% and above, while Ni 1.3% ore, due to higher nickel unit consumption, continued to face increasing sales difficulty. Meanwhile, recent new supply in the Philippines has been concentrated mainly in low-grade ore, causing Ni 1.3% ore inventories to keep accumulating and prices to come under pressure, which further widened the price spread between Ni 1.3% and Ni 1.4% ore; in contrast, demand for Ni 1.4% and Ni 1.5% ore remained relatively stable.
Supply and weather side, the Philippine nickel ore market is currently seeing a pattern of continuously increasing supply and relatively weak demand. Although the Philippines is now in its rainy season, the weather’s overall impact on nickel ore production has been limited. Recent rainfall was mainly concentrated in the western and northern parts of Luzon, especially the Zambales area, while Surigao, the Philippines’ main nickel ore producing region, experienced relatively dry weather overall over the past week, with only sporadic showers. Mining operations, land transport, and port loading remained largely normal, with only some small-scale mines affected by localized rainfall. In the coming week, Zambales is expected to see more pronounced rainfall, which may have some impact on local mine production and logistics; Surigao is expected to stay relatively dry, with only isolated showers, so the impact on mine production and port shipments should be limited. Overall, intermittent rainfall may cause brief operational delays at individual mine sites, but it is not expected to significantly affect overall Philippine nickel ore supply and exports, so the price-supporting role of this round of rainy season remains fairly limited. As mine production continues to climb, the volume of ore available in the market keeps increasing, while buyers remain cautious in procurement and keep raising their ore grade requirements. The buying center continues to focus on medium- and high-grade ore, and the sales pace of low-grade ore has slowed noticeably. Mine and port inventories keep growing, further depressing market prices.
Market sentiment and outlook side, supply side, mines in the southern Philippines continue to maintain normal production and shipments, but as inventories keep accumulating, selling pressure has been steadily increasing, and some mines have gradually shown more willingness to negotiate prices, especially for low-grade ore. Demand side, buyers are still mainly meeting immediate production needs and have not actively built inventories. Against the background of uncertain downstream demand, overall procurement strategies remain relatively cautious. Outlook side, the Philippine nickel ore market is expected to stay in the doldrums in the short term. If subsequent weather does not bring persistent heavy rainfall that significantly tightens supply, and if downstream demand does not improve markedly, the steadily rising ore supply will continue to weigh on the market. High-grade ore is expected to still find relatively stable demand support, while low-grade ore, due to ample supply and slow sales, is likely to continue facing significant downward price pressure.
Indonesia Market:
On the price side, as the HMA and HPM for the second half of July took effect from July 15, Indonesia's local nickel ore prices have been adjusted downward in line with the new benchmark. For limonite ore, Ni 1.2% ore CIF price is around $29.5/wmt, and Ni 1.3% ore around $31.5/wmt; for saprolite ore, Ni 1.4% ore CIF price is around $54.9/wmt, Ni 1.5% ore around $61.2/wmt, and Ni 1.6% ore around $66.1/wmt. Affected by the HMA decline, the HPM benchmark prices for various grades pulled back in tandem, and the transaction benchmark price of Indonesia's local ore was generally lowered by about $2–3/wmt from the first half of the period. Currently, market transactions have largely been executed at the new HPM benchmark price. Against the backdrop of ample supply and high smelter inventories, Indonesia's local nickel ore prices are expected to remain in the doldrums in the near term.
On the weather side, the weather in Indonesia's main nickel ore producing areas is expected to remain relatively stable overall in the coming week. Central Sulawesi, Southeast Sulawesi, and Halmahera are expected to see intermittent light to moderate rain with localized thunderstorms, but the rainfall will be short-lived and intermittent, which is not expected to cause lasting disruption to mine production, land transportation, and port shipments. Overall, localized rainfall may cause brief delays at individual mine sites, but there is currently no widespread heavy rainfall, which is not expected to significantly affect Indonesia's nickel ore supply or port shipments.
On the supply-demand and market sentiment side, Indonesia's local nickel ore market still maintains an overall loose supply pattern. Currently, smelter inventories remain high, with nickel ore stocks at RKEF smelters able to support about 2–3 months of production and those at hydrometallurgy smelters about 2 months, so overall restocking demand is still limited.
On the supply side, mines maintain normal production and sales, and saprolite ore supply remains ample. RKEF smelters' procurement demand is generally stable, but high inventories cap the upside room for prices. For limonite ore, procurement demand from HPAL projects remains steady, but market supply still exceeds near-term demand. The current transaction benchmark price for limonite ore is around $33–35/wmt. Small and medium-sized miners have limited acceptance of the current price and relatively low willingness to sell, so actual transactions are still mainly concentrated among large miners. As the new HMA and HPM benchmark took effect from July 15, mines continue to monitor the impact of the HPM benchmark decline on subsequent transaction prices. Most miners still hope to transact at $3–5/wmt above the HPM benchmark, and the bargaining game between buyers and sellers continues.
On the demand side, both pyrometallurgy and hydrometallurgy smelters maintain high inventories, and their procurement is still mainly to meet immediate production needs, without active restocking. Meanwhile, some smelters have raised their procurement grade requirements to Ni 1.45%–1.50%, further weakening market demand for low-grade ore. Against a backdrop of ample ore supply, high smelter inventory levels, and a broad decline in the HPM benchmark price, overall spot transactions remained relatively sluggish, with a strong wait-and-see sentiment prevailing in the market. Overall, Indonesia's local nickel ore market continues to exhibit a pattern of sufficient supply and weak demand, with short-term spot purchases still driven mainly by rigid demand.
Looking ahead, the market will continue to closely monitor the progress of the supplemental RKAB approval, which remains a key factor affecting Indonesia's nickel ore supply in H2. According to market feedback, even if the supplemental RKAB is approved, a buffer period of about one month from approval to the actual release of supply is still needed, so the near-term impact on market supply is relatively limited. If the total approved volume of the supplemental RKAB by end-Q3 falls short of market expectations, or if the approval progress continues to slow down, Indonesia's local nickel ore prices could still find some support. In addition, as Sulawesi enters its rainy season from September to October, mining and transportation may be affected to some extent. If supply tightens, nickel ore prices could still see a staged rebound in Q4.
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