[SMM Nickel Morning Meeting Summary] Hormuz Strait to Establish Safe Maritime Passage; the Most-Traded SHFE Nickel Contract Moved Sideways in Early Trading

8.27 Morning Meeting Minutes

Market Hot Topics:

On August 26, SMM learned that, affected by drought weather, water supply in Indonesia's Luwu region has tightened. Some local nickel smelters have seen their water and power supplies disrupted, leading to production cuts. Meanwhile, smelters in the IMIP and IWIP industrial parks are experiencing water shortages, but this has not yet materially impacted production. Currently, the drought's main impact on nickel smelting is pushing up coke prices and increasing cost pressure. SMM will continue to monitor local water resources and smelter production developments.

Macro:

(1) Iran stated that the Strait of Hormuz would not be immediately opened, and Oman agreed to close the southern passage of the Strait of Hormuz. They also issued a joint statement proposing to establish a safe maritime passage in the Strait of Hormuz mutually agreed upon by both sides.

(2) Shanghai: Expand the trading scale of key metal categories such as copper and aluminum, and accelerate the improvement of futures product sequences for emerging metals like lithium, cobalt, and nickel.

Spot Market:

On August 26, the average price of SMM #1 refined nickel was 130,250 yuan/mt, up 450 yuan/mt from the previous trading day. In terms of spot premiums, the average for Jinchuan #1 refined nickel was 1,600 yuan/mt, up 50 yuan/mt from the previous trading day, while the range for mainstream domestic electrodeposited nickel brands was 0-500 yuan/mt.

Futures Market:

The most-traded SHFE nickel 2610 contract moved in a narrow range in morning trading and, as of the close, was reported at 129,310 yuan/mt, down 0.27%.

Expectations of Indonesian quota supply releases and high inventories create downward pressure, but a weaker US dollar and cost support provide a floor. In the short term, the expected trading range for the most-traded SHFE nickel contract is 127,000-132,000 yuan/mt.

Nickel Sulphate

On August 26, the average price of SMM battery-grade nickel sulphate edged down.

Cost side, driven by stainless steel sentiment, nickel prices were firmer today, and the spot production cost of nickel sulphate rose slightly. Supply side, as costs remain high, some producers are determined to hold prices firm, while others, with high inventory levels, seek to sell and destock. Demand side, entering the month-end procurement period, some enterprises have begun to inquire about prices, but some downstream firms still mainly rely on long-term contracts, leading to relatively weak sentiment for spot order inventory building and lower acceptance of nickel salt prices. Today, the upstream nickel salt smelter's Willingness to Sell Sentiment Factor was 2.0, the downstream precursor factory's Purchasing Sentiment Factor was 2.3, and the integrated enterprise sentiment factor was 2.3 (historical data available in the database).

Looking ahead, in the short term, spot order market activity is expected to remain weak, and nickel sulphate prices are expected to remain under overall pressure.

NPI

Aug 26 news: SMM high-grade NPI market sentiment index stood at 1.85, flat MoM; upstream sentiment index for high-grade NPI was 2.02, flat MoM; downstream sentiment index for high-grade NPI was 1.68, flat MoM. High-grade NPI spot remained in the doldrums, with transaction price centers continuing to move lower and the price spread between buyers and sellers still widening. Downstream steel mills maintained the mentality of pushing for lower prices, with mainstream procurement intentions staying at low levels. High-price supplier offers failed to match actual transactions, and prices for distant-month spot cargoes in the hold fell further. Market pessimism about the outlook heated up. The futures rebound failed to spur downstream restocking, peak season expectations continued to weaken, and the short-term market remained under pressure.

Stainless Steel

According to SMM on Aug 26, SS futures stopped falling and strengthened. During the night session, prices opened and once dipped to a recent low of 14,040 yuan/mt, before shooting up quickly on news of a nickel-iron smelting safety accident at a stainless steel mill in east China. Although prices pulled back after the morning open, they recovered the previous trading day's losses. As of the close, the most-traded SS contract closed at 14,225 yuan/mt. In the spot market, although SS futures repaired somewhat, stainless steel spot end-user demand remained weak. Market inquiries and transactions were not active, with intraday deals mostly driven by futures arbitrage. Spot prices were basically stable with limited fluctuations.

SS most-traded contract. At 10:15 a.m., SS2610 was at 14,270 yuan/mt, up 125 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 400-600 yuan/mt. In the spot market, the average price for Wuxi cold-rolled 201/2B coil was flat; cold-rolled uncut edge 304/2B coil, Wuxi average price rose 25 yuan/mt while Foshan average price was flat; Wuxi cold-rolled 316L/2B coil price was flat; hot-rolled 316L/NO.1 coil, Wuxi offer was flat; cold-rolled 430/2B coil in both Wuxi and Foshan was flat.

This week, stainless steel futures overall remained consolidating at lows. Earlier, impacted by the news of increased Indonesian RKAB nickel ore quotas, SS futures slumped heavily, and the overall market valuation fell to a low range. This week, driven by a broad recovery in nonferrous metals, futures saw a phased repair rebound. However, bearish sentiment from earlier was not fully dispelled, and the rebound lacked strength, leaving the market still consolidating at lows. Bullish confidence remained insufficiently restored. The spot market followed futures weaker, with the price center eding lower. Peak season preheating fell short of expectations, and the supply-demand loose balance remained prominent. Currently, the market is approaching the traditional “September-October peak season”, but end-user stockpiling sentiment is sluggish, downstream demand has not shown a substantive rebound, and on-site transactions remain weak. Overall, purchasing is mainly need-based and in intermittent pulse transactions, lacking sustained and concentrated restocking support. Affected by low-level futures trading, market pessimism persisted, and with steel mills’ willingness to hold prices firm somewhat weakening, spot quotes fell in line with the market, as the price center continued to shift lower. Supply-side pressure increased further. August steel mill production schedules rose MoM, and the pace of industry capacity release accelerated. Against a misaligned pattern of persistently weak end-use demand, market destocking pressure continued to build, pushing up stainless steel social inventory this week. The inventory buildup trend extended, and at the tail end of the off-season, the loose supply-demand contradiction became prominent. The cost and profit side formed bottom support, effectively limiting the downside room for spot prices. This week, both stainless steel finished products and raw material prices fell in tandem, but the decline in finished steel prices was significantly larger than that in raw materials. The price spread between finished steel and raw materials continued to narrow, and steel mill smelting margins were further squeezed, with the industry now approaching the edge of losses. Cost support gradually strengthened, providing a firm floor for spot prices, limiting their downside room, and the market showed signs of resisting declines despite weakness. Overall, this week’s stainless steel market presented a game-like pattern where futures saw a weak recovery from lows, spot weakened in step with futures, demand ahead of the peak season was soft, supply growth lifted inventory, and costs nearing losses put a floor under prices. In the short term, the lack of pre-peak season demand, recovering steel mill production schedules, and ongoing inventory buildup are the core bearish factors of the market, and the overall weak pattern for prices is hard to reverse. However, the risk of losses is appearing, bottom support continues to strengthen, and the downside room for prices is relatively limited, so the market is likely to remain in a weak consolidation pattern. Going forward, key tracking points include the sustainability of SS futures recovery, the pace of downstream pre-peak season stockpiling, changes in steel mill production schedules, changes in the raw material-finished steel price spread, and the progress of inventory buildup.

Nickel ore:

Philippines market:

In terms of prices, Philippine nickel ore prices were generally stable this week. CIF China prices for Ni 1.3%, 1.4%, and 1.5% ore stood at $46, $56.5, and $64.5/wmt, respectively, all flat WoW. Chinese downstream smelters had relatively sufficient inventories, so purchases remained need-based, with overall subdued trading. High-grade ore prices were relatively firm, while low-grade ore still faced some pressure amid ample supply and limited demand recovery. On the weather front, rainfall risks in major Philippine nickel ore areas diverged this week. Palawan saw the highest rainfall risk, with an estimated 40–50 mm, which could intermittently affect mine road transport and vessel loading around the weekend. Zambales, located on the western side of Luzon and affected by the southwest monsoon, also faced high rainfall risk. Surigao’s overall risk was relatively mild, but intermittent rainfall around August 22–23 may cause localized transport and loading disruptions. Overall, the weather impact was mainly concentrated in local logistics and was not enough to change the overall supply landscape. Supply-demand side, the Philippine nickel ore market overall still presented a loose supply and weak demand pattern. Mine production and exports were expected to be essentially normal, with ample spot supply. China’s downstream inventory was high with limited restocking interest, and procurement was mainly to meet immediate production needs. Localized rainfall and shipment delays may tighten spot supply sporadically, but the impact on the broader market was limited. Outlook, Philippine nickel ore prices are expected to consolidate on a subdued note in the coming week. High-grade ore is expected to stay relatively firm, supported by steady NPI procurement demand, while low-grade ore still faces the dual pressure of ample supply and weak demand. As the weather impact gradually eases, mine and port operations are expected to essentially return to normal. Near-term price trends will mainly depend on the pace of downstream restocking in China, loading conditions at Philippine ports, and changes in spot supply.

Indonesia Market:

Price side, Indonesian nickel ore prices edged up this week. The HMA for the second half of August was $16,960/mt, up $314/mt from the first half, an increase of 1.89%. On August 18, the CIF prices for Ni 1.4%, 1.5%, and 1.6% nickel ore were $53.3/wmt, $60.8/wmt, and $65.8/wmt respectively, and they were basically stable on the 19th. The price rebound provided some support, but ample supply and cautious procurement limited upside room. Weather side, Morowali saw limited rainfall, and mining, transportation, and port operations were expected to be essentially normal; Halmahera faced a higher rainfall risk, but there was no significant disruption yet, and the overall impact on supply was limited. Supply-demand side, nickel ore supply remained relatively ample, with limonite inventory slightly increasing, while HPAL production ramp-up drove a decline in saprolite inventory. Most smelters still held inventory sufficient for about two months, with limited demand for spot procurement. Policy side, the market is focused on the additional RKAB quota. APNI proposed adding a 30-million-mt strategic buffer quota on top of the existing approximately 270 million mt of RKAB, bringing the total to around 300 million mt; ESDM stressed that quota adjustments need to consider actual production, downstream demand, and supply-demand balance assessments, and will not be automatically relaxed. Meanwhile, the market is watching whether Indonesia may roll out a new HPM pricing formula this month. If implemented, it may adjust the benchmark pricing for different nickel ore grades and affect mine quotes and smelter procurement costs. The specific plan and implementation timeline are still pending official confirmation. In addition, Indonesia plans to launch a mineral and strategic commodity exchange on January 1, 2027, which is expected to cover nickel, coal, and palm oil, aiming to establish a domestic reference price and potentially boosting Indonesia’s influence in nickel pricing and benchmark formation over the long term. Looking ahead, near-term nickel ore prices are expected to consolidate on a strong note, but upside room is limited. Going forward, focus on the new RKAB approval progress, the 30 million mt strategic buffer quota recommendation, and the HPM pricing formula adjustment.