[SMM Nickel Morning Meeting Summary] July Industrial Production Grows and Housing Prices Hold Steady, the Most-Traded SHFE Nickel Contract Moves Sideways in Early Trading

Aug 19 Morning Meeting Minutes

Market Hot Topics:

The Indonesian government is preparing to establish the Mineral and Strategic Commodity Exchange (BMKS), targeting official operations on January 1, 2027, to enhance domestic price discovery for strategic commodities. Indonesian State Secretary Prasetyo Hadi stated that major Indonesian commodities such as nickel, crude palm oil (CPO), and coal are all under consideration for inclusion in trading, but the final list of tradable products has yet to be determined. The exchange, tentatively called the Indonesia Commodity Exchange (Icomex), will be regulated by the Indonesian Financial Services Authority (OJK). The OJK is currently formulating relevant implementation rules and the handover of regulatory authority, while the government is also studying the interface between the new exchange and the existing Indonesia Commodity and Derivatives Exchange (ICDX).

Macro:

(1) National Bureau of Statistics: In July, the value added of industrial enterprises above designated size increased by 4.5% YoY in real terms; new home sales prices in first-tier cities were flat MoM, following a 0.1% MoM increase in the previous month.

(2) The NDRC has deployed efforts to accelerate the rollout of new-type policy-based financial instruments in 2026 and increase support for private investment projects.

Spot Market:

On August 18, the SMM average price of #1 refined nickel was 128,800 yuan/mt, down 800 yuan/mt from the previous trading day. For spot premiums, the average for Jinchuan #1 refined nickel was 1,400 yuan/mt, unchanged from the previous trading day, while domestic mainstream brands of electrodeposited nickel ranged from -100 to 400 yuan/mt.

Futures Market:

The most-traded SHFE nickel 2609 contract moved sideways in the morning session, closing at 128,410 yuan/mt by the morning close, up 0.19%.

Underpinned by mild cooling in US July PPI and further pullback in rate hike expectations, non-ferrous metals broadly rallied, with nickel prices rebounding from last week’s lows. Expectations of looser RKAB quotas for Indonesian nickel ore persist, but sulphur prices remain elevated above $1,000/mt, providing cost support. In the short term, the most-traded SHFE nickel contract is expected to trade in the range of 125,000-130,000 yuan/mt.

Nickel Sulphate

On August 18, the SMM average price of battery-grade nickel sulphate edged lower.

Cost side, copper prices retreated after a rapid rise, and base metals softened somewhat, dragging nickel prices lower and weakening spot production costs for nickel sulphate. Supply side, with costs still elevated, some producers intend to hold prices firm, while others with high inventory levels are seeking to sell and destock. Demand side, some downstream enterprises have been relying mainly on long-term contracts recently, with weak sentiment for building spot order inventory and relatively low acceptance of nickel salt prices. Today, the Willingness to Sell Sentiment Factor for upstream nickel salt smelters was 2, the purchase sentiment factor for downstream precursor plants was 2.3, and the sentiment factor for integrated enterprises was 2.3 (historical data available upon database login).

Looking ahead, the spot order market is likely to stay sluggish in the near term, and nickel sulphate prices are under overall pressure.

NPI

As of August 18, the SMM high-grade NPI market sentiment factor was 1.88, down 0.03 MoM, the upstream sentiment factor for high-grade NPI was 2, down 0.06 MoM, and the downstream sentiment factor for high-grade NPI was 1.76, flat MoM. The high-grade NPI spot market trading remained weak, with declining stainless steel prices capping downstream purchasing acceptance, and steel mills generally pushing for lower prices. Firm-price offers were scarce, with most deals negotiated around the average spot price. Price spreads between high and low nickel unit cargoes narrowed. On the supplier side, willingness to sell at low prices was insufficient, resulting in a clear price divergence between upstream and downstream. Actual transactions were mostly small, scattered deals, with large-scale trades still elusive. The near-term market is set to continue its tug-of-war and consolidation.

Stainless steel

According to SMM on August 18, SS futures maintained a consolidation on a strong note, extending yesterday's rally, with prices further firmer. As of the close, the most-traded SS contract settled at 14,275 yuan/mt. In the spot market, SS futures rebounded and strengthened yesterday afternoon, and mainstream steel mill guidance prices held steady, leading to a clear recovery in inquiries and deals. Today, momentum for further gains was insufficient, trading softened somewhat, but traders' quotes remained firm.

The most-traded SS futures contract. At 10:15 a.m., SS2610 was at 14,235 yuan/mt, up 15 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 435-635 yuan/mt. In the spot market, average prices for cold-rolled 201/2B coil in Wuxi were flat; for cold-rolled uncut edge 304/2B coil, average prices rose 25 yuan/mt in Wuxi and 25 yuan/mt in Foshan; cold-rolled 316L/2B coil prices in Wuxi fell 100 yuan/mt; hot-rolled 316L/NO.1 coil prices in Wuxi were flat; cold-rolled 430/2B coil prices in both Wuxi and Foshan were unchanged.

This week, stainless steel futures were consistently disrupted by macro sentiment, maintaining an overall weak pullback. During the week, repeated disruptions from Indonesia's RKAB nickel mine approval news roiled industry expectations. Combined with the US Fed's hawkish policy signals and the unresolved US-Iran geopolitical conflict, macro uncertainty stayed high. Multiple bearish factors resonated to drag SS futures lower through the week, with bears dominating market sentiment and the futures' center steadily shifting downward. The spot market showed a pattern of weak futures-spot correlation and soft supply-demand dynamics, with inventory resilience standing out, and prices broadly declined. The market was still in the traditional consumption off-season, and signs of recovery before the September-October peak season had not yet emerged. End-users were cautious in purchasing, with market transactions mainly based on need-based procurement. There were no concentrated restocking actions, and need-based demand sustainability was weak, making it difficult to provide upward support for spot prices. Supply side, in August, stainless steel mill production schedules steadily increased, and the pace of industry capacity release accelerated. Against the backdrop of end-use demand not recovering synchronously, market supply-demand pressure marginally increased. But during the week, Typhoon 'White Dolphin' directly impacted east China. Core ports and land logistics transportation were hindered, and the pace of cargo shipping and arrivals was restricted. This partially offset the pressure from supply growth, keeping stainless steel social inventory largely stable this week without significant inventory buildup. The reasonable inventory pattern provided bottom support for spot prices. Cost and profit side, this week, product prices pulled back along with the futures, and steel mills' efforts to hold prices firm loosened somewhat, dragging spot quotes downwards. However, the raw material side showed sufficient resilience, effectively limiting price declines. During the week, NPI prices were relatively firm, and stainless steel production costs provided strong support. However, the weak pullback in product prices led to a contraction in the price spread between products and raw materials, and steel mill smelting profits narrowed significantly. Overall, the rigid support from the cost side was prominent, effectively avoiding a deep decline in spot prices. The market showed a characteristic of 'futures falling, spot weakening, cost-supported bottom, limited decline.' Overall, this week, the stainless steel market presented a tussle pattern of macro headwinds weighing on futures, weak off-season need-based demand, supply growth increasing pressure, stable inventory providing bottom support, and cost resilience resisting declines. The short-term market fundamentals are clearly weak, with steel mills gradually increasing production further amplifying demand pressure in the later market, and prices are at risk of a phased pullback. However, reasonable inventory levels and firm raw material costs formed a dual bottom support, constraining downside room, and the overall market was mainly in the doldrums and consolidating. Going forward, focus on tracking macro sentiment changes, SS futures fluctuations pace, end-use off-season need-based demand recovery progress, steel mill production increase implementation, and inventory circulation changes.

Nickel ore:

Philippine market:

On the price front, this week, Philippine nickel ore prices were largely stable. Mainstream CIF quotes to China were Ni 1.3% $46/wmt, Ni 1.4% $56.5/wmt, Ni 1.5% $64.5/wmt, all flat WoW.

Major shipping route freight rates also remained unchanged: Surigao–Lianyungang $14.5/wmt, Surigao–Ningde $13.5/wmt, Zambales–Lianyungang $12.75/wmt, Zambales–Ningde $12.25/wmt. Chinese downstream smelter inventories were relatively sufficient, restocking demand was limited, and purchases remained cautious.

Weather-wise, this week some nickel ore-producing areas in the Philippines were affected by a typhoon and related severe weather, with localized disruptions to mine production, land transportation, and port loading. The overall impact on Palawan and Homonhon Island was relatively limited, but some areas experienced intermittent rainfall and worsening sea conditions, leading to delays in shipping schedules and loading pace. Zambales was more significantly affected by heavy rainfall and strong winds, causing some localized disruptions to port operations and ore transportation. Overall, the typhoon mainly affected some ports and loading activities, without causing widespread disruption to Philippine nickel ore supply.

Supply-demand and market sentiment: the Philippine nickel ore market continued to show a pattern of relatively loose supply and weak demand. Although the typhoon caused intermittent disruptions to ports and loading in some areas, overall mine production and exports were largely maintained, and spot supply remained generally ample. Localized shipping delays could tighten some spot supply in the short term, but not enough to alter the overall market pattern of loose supply.

Chinese downstream smelters had relatively sufficient inventory, with procurement mainly to meet immediate production needs, leading to subdued overall trading. Philippine mines, supported by freight and production costs, maintained firm offers and were reluctant to cut prices significantly. However, amid loose supply and limited demand recovery, downward pressure on low-grade nickel ore gradually increased. In contrast, high-grade nickel ore prices remained relatively firm, mainly supported by stable procurement demand from NPI smelters and the relatively tight supply-demand balance for high-grade NPI raw materials.

Looking ahead, in the coming week, as the typhoon's impact gradually weakens, Philippine mine production and port loading are expected to gradually return to normal, although some ports may still see shipping schedule adjustments. Overall market supply is expected to remain loose, with Chinese downstream users still mainly making just-in-time procurement, and demand improvement limited. Against the backdrop of loose supply and slow demand recovery, low-grade nickel ore prices are expected to remain under pressure, while high-grade ore prices stay relatively firm. Short-term market sentiment will remain cautious, with low-grade ore price trends mainly dependent on the pace of restocking by Chinese downstream users, the recovery of Philippine ports, and subsequent spot supply.

Indonesia market:

Price-wise, this week was the last week of the HMA pricing period for the first half of August, with HMA at $16,646/mt. Affected by the recent downward adjustments in HMA and HPM, Indonesian nickel ore prices were generally weak. However, due to ample market supply and high smelter inventories, actual transaction prices were basically stable MoM. Limonite CIF prices: about $29/wmt for Ni 1.2%, $31/wmt for Ni 1.3%; saprolite ore: about $52.6/wmt for Ni 1.4%, $60/wmt for Ni 1.5%. Low-grade nickel ore mainstream transaction prices were approximately $31/wmt. In the near term, given ample supply and cautious procurement, nickel ore prices are expected to remain stable, and the market continues to watch the additional RKAB quota and its impact on supply.

Weather conditions, the weather in major nickel ore producing areas of Indonesia was largely under control. Morowali and Konawe experienced intermittent rainfall, but it did not significantly impact mining, transportation, or port operations. Halmahera saw relatively more rainfall, with localized heavy rain potentially causing periodic disruptions to mining and logistics, but no widespread supply outages occurred. Obi Island also had intermittent rainfall, and overall mining and loading activities remained normal. Overall, weather had limited impact on Indonesia’s nickel ore supply and logistics this week.

Supply-demand and market sentiment, supply in the Indonesian nickel ore market was still ample, with saprolite ore inventory continuing to edge up. Meanwhile, limonite ore inventory declined as some HPAL projects gradually ramped up production. Currently, most smelters’ inventories could still last about two months, reducing the need for additional spot purchases.

Policies and RKAB, this week the Indonesian nickel ore market continued to focus on the additional RKAB quota for 2026. ESDM still stressed that RKAB adjustments must be evaluated based on actual production, downstream industrial demand, market conditions, and the overall supply-demand balance, and are not automatically relaxed.

The Indonesia Nickel Miners Association (APNI) proposed adding 30 million tonnes of strategic buffer quota on top of the existing approximately 270 million tonnes of RKAB, bringing the potential total to around 300 million tonnes. APNI noted that as Indonesia’s smelting capacity continued to expand, the nickel ore volume required for around 80 smelters operating at full capacity could reach about 315 million tonnes per year, thus necessitating additional buffer space.

Meanwhile, Weda Bay Nickel (WBN)’s additional RKAB became another focus this week. Earlier, the market had rumored that WBN might receive an additional approximately 25 million tonnes of quota, but ESDM had not yet officially confirmed this additional quota, so it should not be counted as approved supply for now. Subsequent RKAB adjustments for WBN will remain a key variable affecting Indonesia’s saprolite ore supply and market sentiment.

Overall, government policy remained centered on balancing downstream raw material demand with mineral resource control. Whether the 30 million tonnes buffer quota proposed by APNI and WBN’s additional quota are ultimately approved will directly affect nickel ore supply expectations for H2.

Looking ahead, in the coming week, Indonesian nickel ore prices are expected to consolidate on a subdued note. Ample supply, high smelter inventories, and cautious procurement will continue to cap upside room. The market will continue to monitor the approval of new RKAB additions and the 30 million tonnes strategic buffer quota proposal by APNI. If a large number of new quotas are approved, the increased supply could further depress ore prices; if the approval progress is slower or quota releases are limited, high-grade saprolite ore prices may receive some support. The market is expected to remain in a wait-and-see mode in the short term.