[SMM Nickel Morning Meeting Summary] US Fed's Warsh says inflation has not improved, rate hike expectations heat up; the most-traded SHFE nickel contract continues to consolidate at lows in early trading

September 1 Morning Meeting Minutes

Market hot topics:

GEM's semi-annual report stated that starting from April 2026, the company's overseas nickel resource project capacity has been gradually recovering. As of July 2026, the company's MHP daily nickel production has exceeded 370 mt, with H2 nickel production planned at 65,000 mt, up 134% HoH. Meanwhile, as the US-Iran war eases, sulphur prices have entered a downward channel, facilitating the recovery of nickel resource profitability. The company is striving to promote the coordinated development of its various businesses.

Macro:

(1) Fed Chairman Warsh: Inflation data does not show significant improvement in the trend; the Fed's primary focus at present should be prices; we must be convinced that underlying inflation is moving toward the target, otherwise we still have work to do. It is difficult to describe financial conditions as restrictive. Market pricing shows that the probability of a Fed rate hike in September is higher than the probability of keeping rates unchanged.

(2) In August, the manufacturing PMI was 49.8%, up 0.6 percentage points from the previous month, with the prosperity level rebounding. By enterprise size, the PMI for large enterprises was 50.6%, up 1.1 percentage points MoM, above the threshold; the PMI for medium-sized enterprises was 49.4%, down 0.3 percentage points MoM, below the threshold; the PMI for small enterprises was 47.9%, up 0.5 percentage points MoM, below the threshold.

Spot market:

On August 31, the SMM average price of #1 refined nickel was 127,250 yuan/mt, down 1,350 yuan/mt from the previous trading day. In terms of spot premiums, the average premium for Jinchuan #1 refined nickel was 1,500 yuan/mt, up 100 yuan/mt from the previous trading day, while the range for mainstream domestic electrodeposited nickel brands was -200 to 400 yuan/mt.

Futures market:

The most-traded SHFE nickel contract (2610) continued to consolidate at lows in early trading, closing the morning session at 126,750 yuan/mt, down 1.13%.

Rising expectations for US Fed interest rate hikes, a stronger US dollar, high inventory, and weak demand have formed multiple pressures. In the short term, the most-traded SHFE nickel contract price is expected to trade in the range of 126,000-131,000 yuan/mt.

Nickel sulphate

On August 31, the SMM average price of battery-grade nickel sulphate declined.

Cost side, macro rate hike expectations have heated up again, nickel prices have fallen sharply, and the spot production cost of nickel sulphate has declined; supply side, some producers are holding relatively high inventory levels and seeking production cuts to destock, with overall supply edging slightly lower; demand side, entering the month-end procurement period, some enterprises have begun making inquiries, but some downstream enterprises still rely mainly on long-term contract supply, 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 2.0, the Purchasing Sentiment Factor for downstream precursor plants was 2.3, and the sentiment factor for integrated enterprises was 2.3 (historical data can be queried in the database).

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

NPI

August 31 news: SMM's high-grade NPI market sentiment factor was 1.81, down 0.01 MoM. The upstream sentiment factor for high-grade NPI was 1.93, down 0.05 MoM, while the downstream sentiment factor was 1.70, up 0.03 MoM. The high-grade NPI market continued to weaken today, with steel mills further lowering their purchase bids. Leading mills indicated lower buying interest, and downstream buyers have begun to accept discounts for 10-11% grade material. Actual transactions remained sparse, with only a few scattered deals concluded, and negotiation centers continued to shift lower. Weakening nickel futures dragged on NPI market sentiment, with the market widely believing that NPI lacks upward drivers. Supply-demand and cost factors jointly influenced current pricing, while the bearish outlook for steel scrap also further pressured raw material prices. Overall trading activity was sluggish, with most participants remaining cautious and on the sidelines, and the market is expected to stay under pressure in the short term.

Stainless Steel

According to SMM on August 31, SS futures extended their earlier weak trend, continuing to slide and successfully breaking below the 13,900 yuan/mt level. By the close, the most-traded SS contract settled at 13,890 yuan/mt. In the spot market, although stainless steel mills' guidance prices held steady and most traders kept their quotes stable, market confidence weakened further due to the continued decline in SS futures. Transactions remained sluggish, with no signs of recovery ahead of the peak season.

SS most-traded futures contract. At 10:15 a.m., SS2610 was quoted at 13,865 yuan/mt, down 120 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 485-885 yuan/mt range. In the spot market, the average price of Wuxi cold-rolled 201/2B coil was flat; for cold-rolled uncut edge 304/2B coil, the average price in Wuxi held steady, and the Foshan average price also held steady; the price of cold-rolled 316L/2B coil in Wuxi was flat; hot-rolled 316L/NO.1 coil quotes in Wuxi were flat; and cold-rolled 430/2B coil prices in both Wuxi and Foshan were flat.

This week, stainless steel futures showed an overall weak breakdown trend, with intensified volatility and a continued downward shift in the price center. Futures remained broadly in the doldrums during the week. Midweek, an unexpected safety incident at an NPI smelting line in east China briefly raised supply concerns, driving SS futures to shoot up and rebound. However, the positive impact lacked sustainability, and the core bearish logic remained unchanged. Futures subsequently weakened again and broke below the key 14,000 yuan/mt level, with bearish sentiment continuing to be released and overall trading sentiment staying weak. The spot market weakened in tandem with futures, with pre-peak-season demand remaining absent and the loose supply-demand balance in the market becoming more pronounced. We are now at the end of August, approaching the traditional September-October peak season, but end-user stockpiling in advance has not started as expected. Downstream restocking demand remains sluggish, spot trading continues to be muted, and overall market confidence is insufficient. Supply-demand pressure keeps building. Weak end-user purchasing combined with relatively heavy shipment pressure across the market has led steel mills to focus on active selling and reducing their own inventories, driving increased release of material into the distribution chain. This week, stainless steel social inventory rose further, extending the inventory buildup trend. Meanwhile, mainstream steel mills offered price compensation to agents for earlier allocations, clearly loosening their price-holding strategy and further weakening support for spot prices. Coupled with continued breakdowns in futures, the spot price center kept pulling back. Cost and profit factors provided a floor, effectively limiting the room for a sharp decline in spot prices. This week, stainless steel product prices and nickel-related raw material prices pulled back in tandem, but product prices fell more sharply under pressure from futures. The price spread between products and raw materials continued to narrow, further squeezing steel mill smelting margins, and the industry as a whole is now on the edge of losses. Rigid support from the cost side is gradually becoming more evident, effectively offsetting some of the bearish pressure from futures and supply-demand conditions. As a result, the downside in spot prices is relatively contained, and the market is showing a weak but not sharply lower pattern. Overall, this week the stainless steel market presented a game of futures retreating after a rapid rise and breaking down, pre-peak-season restocking demand falling short, steel mills loosening price support, inventory continuing to build, and costs nearing loss-making levels that provide underlying support. In the short term, weak end-use demand, inventory buildup, and bearish dominance in futures are the core negatives, making it difficult to reverse the weak market trend. However, the risk of losses continues to constrain downside room, and the market is likely to consolidate on a subdued note. Going forward, key factors to monitor include the sustainability of SS futures, the pace at which downstream peak-season stockpiling materializes, changes in steel mill selling and price-support policies, shifts in the raw material-product price spread, and the progress of social inventory buildup.

Nickel ore:

Philippine market:

Prices: This week, Philippine nickel ore prices were largely stable overall. Mainstream CIF China quotes were $46/wmt for Ni 1.3%, $56.5/wmt for Ni 1.4%, and $64.5/wmt for Ni 1.5%, all flat WoW. Chinese downstream smelters hold relatively sufficient inventory, with limited restocking demand. Purchases were mainly to meet immediate production needs, and overall spot trading remained sluggish. High-grade ore prices were relatively firm, while low-grade ore continued to face pressure amid ample supply and limited demand recovery.

Weather: This week, weather risks in the main nickel ore producing areas of the Philippines became more divergent. Weather in Palawan and Homonhon Island remained generally stable, with limited impact on mining, transportation, and loading. Zambales remained the main weather risk area, where periodic heavy rainfall and strong winds could cause localized disruptions to mining, land transport, and port operations, though overall disturbance was limited. Overall, weather conditions this week had not yet caused significant impact on Philippine nickel ore production and exports, and operational risks in Zambales remained higher than in other major producing areas.

In terms of supply-demand and market sentiment, the Philippine nickel ore market generally showed a pattern of ample supply and weak demand. Despite the current rainy season, mine production, transportation, and port loading remained largely normal, and spot supply was relatively sufficient. Inventory at Chinese downstream smelters was relatively adequate, and procurement remained primarily just-in-time, with overall transactions sluggish.

Supported by freight costs and production costs, Philippine mines maintained relatively firm offers and were reluctant to cut prices significantly. However, against the backdrop of ample 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 relatively tight supply of high-grade NPI raw materials.

Looking ahead, Philippine nickel ore supply and exports are expected to remain normal over the coming week, with market supply still in a relatively ample state. Chinese downstream buyers are expected to continue making just-in-time procurement, with limited improvement in overall transactions. With ample supply and slow demand recovery, low-grade nickel ore prices are expected to remain under pressure, while high-grade ore prices stay relatively firm. Overall market sentiment is expected to remain cautious, and the subsequent price trend will mainly depend on the pace of restocking by Chinese downstream buyers, port loading activity in the Philippines, and spot supply conditions.

Indonesia market:

In terms of prices, Indonesian nickel ore CIF prices remained stable this week, with Ni 1.4%, 1.5%, and 1.6% quoted at $53.3/wmt, $60.8/wmt, and $65.8/wmt, respectively. Current smelter raw material inventory was maintained at around two months, restocking willingness was weak, spot transactions were overall sluggish, and upward price momentum was limited.

In terms of supply, influenced by the El Niño climate background, Indonesia is currently in a relatively dry season overall, with relatively limited rainfall in major nickel ore producing areas. Mining and shipments remained largely normal, and weather factors had relatively weak impact on the supply side. Although Halmahera and Obi Island still experienced periodic rainfall and sea condition fluctuations, no significant impact on overall supply has been observed so far. Overall, the dry weather was conducive to maintaining stable mine production and port loading.

In terms of demand, the market continued to see relatively sufficient supply. High-grade ore (Ni 1.45% and above) faced relatively strong procurement competition due to limited local supply, and prices are expected to remain relatively firm. Supply of Ni 1.3–1.4% ore was relatively ample, with some demand continuing to be supplemented by imported ore from the Philippines.

On the HPM front, spot prices for limonite ore remain notably below the theoretical HPM price, leaving smelters with limited purchase willingness. The HPM premium is expected to narrow further in September, mainly due to relatively sufficient HPAL raw material inventories and limited restocking demand, while the dry season favors mine production and shipments, reducing supply-side disruptions. In addition, some HPAL enterprises show low acceptance of high-grade HPM pricing and prefer to purchase based on actual market transaction levels. If subsequent RKAB approvals and quota releases further improve supply expectations, buyers' bargaining power may continue to strengthen, further compressing the HPM premium.

On the policy front, the market remains focused on the pace of subsequent RKAB approvals and actual supply releases. APNI previously proposed a 2026 RKAB quota of 270 million wmt, with an additional 30 million wmt strategic buffer. If quotas continue to be released, improved supply expectations may further cap upside room for spot prices and pressure limonite ore premiums.

Looking ahead, Indonesian nickel ore prices are expected to remain stable-to-weak in the near term. High-grade ore is supported by supply constraints, while low-grade ore and limonite ore are weighed down by ample inventories and weak demand. Entering September, the narrowing HPM premium is expected to become a key change in the limonite ore market. If HPAL restocking demand does not recover significantly and RKAB supply is further released, the discount between spot prices and the theoretical HPM price may continue to widen. The market will focus on RKAB approvals, smelter restocking pace, HPM premium changes, and high-grade ore supply.