[SMM Nickel Morning Meeting Summary] US PPI exceeded expectations, rate hike expectations heated up, the most-traded SHFE nickel contract opened lower and moved lower in early trading

9.14 Morning Meeting Minutes

Market Hot Topics:

On September 10, Eramet announced that PT Weda Bay Nickel (PT WBN) had received approval from Indonesian authorities and has begun gradually resuming mining operations, following approximately four months of maintenance and upkeep. The approval involves a supplementary nickel ore RKAB quota for H2 2026, though Eramet has not yet disclosed the specific approved volume. Eramet stated that the production resumption will proceed gradually, with the pace depending on the redeployment of contractors and equipment, adjustments to the annual mining plan, and the completion of related administrative work. The company is currently unable to reliably estimate nickel ore production, sales, and grade for the remainder of 2026, and will update its 2026 nickel ore export guidance in due course.

Macro:

(1) US August PPI exceeded expectations, with the probability of a September rate hike surpassing 70%. August PPI rose 5.4% YoY (vs. 5.3% expected, 4.7% prior), and core PPI rose 4.6% YoY. Following the data release, the market priced in a more than 70% probability of a US Fed rate hike in September, and fully priced in the first rate hike of this cycle by October at the latest. The 10-year US Treasury yield surged 12 basis points to 4.967% (a near three-year high), and the US dollar index climbed back above the 99 mark to 99.08. Tonight's August CPI will be the final verdict before next week's policy meeting.

(2) The European Central Bank raised rates for the second time this year. All three key interest rates were raised by 25 basis points (the deposit facility rate to 2.50%). Lagarde said the Middle East conflict has made inflation more persistent, that inflation is expected to remain above target for an extended period, and the ECB also raised its inflation expectations for the next two years. The market is pricing in three more ECB rate hikes by mid-next year, with the earliest move possibly in October.

(3) Oil prices surged about 8%, with both WTI and Brent breaking above $100. Yemen's Houthi forces seized the Red Sea port city of Mokha and entered the Hanish Islands, approaching the Bab el-Mandeb Strait, while shipping through the Strait of Hormuz and the Red Sea remained disrupted. Saudi Arabia reported that its August crude oil production plunged by 1.9 million barrels per day to the lowest level since 1990. WTI settled up 6.73% at $100.59 per barrel, and Brent rose 6.71% to $106.3 per barrel, both hitting new highs since late May. US diesel prices broke above $6 per gallon.

Spot Market:

On September 11, the average price of SMM #1 refined nickel was 127,600 yuan/mt, down 1,700 yuan/mt from the previous trading day. In terms of spot premiums, the average premium for Jinchuan #1 refined nickel was 2,400 yuan/mt, up 100 yuan/mt from the previous trading day, while mainstream domestic brands of electrodeposited nickel ranged from -100 to 500 yuan/mt.

Futures Market:

The most-traded SHFE nickel contract (2610) opened lower and trended downward in early trading, closing the morning session at 126,000 yuan/mt, down 1.88%.

Short-term outlook:

After US PPI beat expectations, Fedwatch bets on a September rate hike exceeded 70%. Under pressure from a stronger US dollar and higher US Treasury yields, LME metals fell sharply across the board overnight. Bearish sentiment is expected to remain heavy before tonight's US August CPI release. In the short term, the most-traded SHFE nickel contract is expected to trade at 126,000-129,000 yuan/mt.

Nickel sulphate

As of this Thursday, SMM battery-grade nickel sulphate average price fell.

Demand side, affected by weakening downstream restocking sentiment, operating rates at some downstream enterprises moved lower this month. They mainly picked up goods under long-term contracts, while spot order restocking sentiment was weak and acceptance of nickel salt prices was low. Supply side, some upstream enterprises held high inventory levels and planned to lower operating rates to sell and destock. Looking ahead, the market is expected to remain in a supply-demand weak pattern in the short term, with destocking as the main theme and prices under pressure overall.

Inventory-wise, this week the upstream nickel salt smelter inventory index held at 8 days, the downstream precursor plant inventory index rose from 12.9 days to 12.2 days, and the integrated enterprise inventory index held at 9.8 days. In terms of buying and selling strength, this week the upstream nickel salt smelter Willingness to Sell Sentiment Factor rose from 2.0 to 2.1, the downstream precursor plant purchasing sentiment factor fell from 2.2 to 2.1, and the integrated enterprise sentiment factor held at 2.3. (Historical data can be accessed via the database)

NPI

SMM 10-12% high-grade NPI average price fell 17.7 yuan/nickel unit WoW to 1,095.5 yuan/nickel unit (ex-factory, tax included). The Indonesia NPI FOB index average price fell $2.93/nickel unit WoW to $141.14/nickel unit. This week, the high-grade NPI market continued to weaken, with the price center moving lower. Price bargaining between upstream and downstream intensified, and the market entered a stalemate and consolidate-at-lows phase. At the start of the week, upstream and downstream price expectations diverged significantly. Suppliers resisted selling at low prices, but downstream buyers kept lowering their bids. Acceptance of higher-priced cargoes was poor, and only a small number of transactions were concluded at low offers. By the last two days of the week, multiple factors weighed on the market, including recovering supply, end-use consumption under pressure, continued inventory accumulation, and weak macro sentiment, triggering a price collapse. Downstream stainless steel market was weak. Steel mills faced losses and, with overall ample raw material inventory, had low willingness to actively restock. Most steel mills stayed on the sidelines, and some enterprises suspended spot purchases to wait for market direction. Market pessimism was heavy, and participants generally held bearish views on the outlook. Stainless steel downstream order-taking was weak, and 300-series production schedules were expected to be cut, continuing to suppress steel mills' raw material procurement demand. Some steel mills delayed procurement plans and waited to see the October market. Port inventory also showed an increasing trend, with suppliers facing rising shipment pressure, further suppressing spot market flexibility.

Stainless steel

This week, stainless steel futures continued to consolidate at low levels on a weak note. The failure of peak season expectations fueled bearish sentiment, with futures hitting bottom at 13,680 yuan/mt, a new low since February. The spot market weakened in tandem, with end-use demand absent and buyers maintaining a hand-to-mouth purchasing pattern, resulting in sluggish trading. Steel mills' resolve to hold prices firm wavered, with quotes lowered successively. Traders proactively destocked and sold, while downstream wait-and-see sentiment remained strong and transactions were subdued. On the inventory side, the market showed a weak supply-demand pattern with stable inventory. Although steel mills lowered production schedules to ease supply pressure, weak demand led to a supply-demand mismatch, with social inventory basically stable. On the cost and profit side, the market remained weak under pressure. Finished product and raw material prices pulled back in tandem, with steel mill losses showing no substantive improvement. The cost side could only provide weak bottom support. Overall, the market presented a weak game pattern characterized by failed peak season expectations, weak rigid demand, declines in both futures and spot prices, stable inventory, and losses. In the short term, demand recovery falling short of expectations and bearish sentiment remain the core negative factors. The weak consolidation in futures is difficult to reverse, but cost support will limit the room for deep declines.

This week, stainless steel finished product and raw material prices pulled back in tandem, with industry smelting profits remaining in losses and the cost center shifting further downward. Based on 304 cold-rolled calculations, steel mills' profit margin calculated on current raw materials was -0.25%, and -2.56% based on inventory raw materials, with production and operating pressure continuing to mount.

Nickel-based raw material prices fell under pressure. The September-October peak season expectations failed to materialize, end-use demand was sluggish, and steel mills showed low acceptance of high-priced nickel raw materials. NPI port inventory remained at high levels, and ample supply drove quotes lower. Indonesian high-grade NPI arrivals with tax included fell 25 yuan/nickel unit to 1,085 yuan/nickel unit. Stainless steel scrap prices weakened in tandem, with Shanghai 304 off-cuts excluding tax falling 200 yuan/mt to 10,100 yuan/mt, with cost substitution advantages unable to offset fundamental negatives. Chrome-based raw materials showed a weak-but-supported characteristic. High-carbon ferrochrome followed the weak market with a slight correction, but supported by rising LME chrome ore prices, the decline was limited. Mainstream high-carbon ferrochrome prices in Inner Mongolia fell 50 yuan WoW to 7,800-7,900 yuan/mt (50% metal content). Overall, prices across the entire industry chain weakened in tandem, with the loss-making pattern persisting. In the short term, end-use demand is unlikely to see substantive recovery, and steel mill raw material procurement remains weak. The stainless steel cost center is expected to remain in the doldrums.

Nickel ore:

Philippine market:

In terms of prices, Philippine nickel ore prices weakened overall this week, with mainstream CIF China quotes lowered WoW. Specifically, Ni 1.3% fell from $46/wmt to $45/wmt, Ni 1.4% from $56.5/wmt to $55/wmt, and Ni 1.5% from $64.5/wmt to $63.5/wmt. Overall, prices for medium- and high-grade ore pulled back slightly, with declines more pronounced for Ni 1.3% and Ni 1.4%. Chinese downstream smelters currently hold relatively sufficient raw material inventories, restocking demand remains weak, and purchases are mainly to meet immediate production needs, with overall spot transactions sluggish.

On the weather front, weather risks in the Philippines' major nickel ore producing areas rose this week, with Zambales emerging as the main disruption zone. On September 4, the southwest monsoon (Habagat) brought heavy rainfall to Zambales, which may cause phased impacts on mining, land transport, and port loading in the short term. By comparison, operations in Palawan and other major producing areas remained largely normal. Overall, weather disruptions have not yet significantly altered the Philippines' overall supply landscape, but short-term operational risks in Zambales have increased.

Supply side, the Philippines' overall nickel ore supply remains relatively ample. Affected by recent heavy rainfall, production and loading at some mines in Zambales may slow down in phases, but this is not yet enough to create a significant supply tightening. Philippine nickel ore exports remain mainly influenced by downstream demand from China and Indonesia, as well as weather conditions. Philippine nickel ore exports to Indonesia have increased notably in recent years, indicating that the Indonesian market remains an important demand source for Philippine ore. In the short term, localized weather disruptions are more reflected in changes to shipment pace, with limited impact on overall supply.

For the Indonesian market, CIF Indonesia prices for Philippine nickel ore face some downward pressure ahead. As Indonesian domestic nickel ore prices have weakened slightly recently and Ni 1.3–1.4% ore supply is relatively ample, Indonesian smelters' price acceptance for imported Philippine ore has declined. With Indonesian domestic ore prices at lower levels, Philippine miners may need to further lower CIF Indonesia quotes if they wish to maintain competitiveness in the Indonesian market. The price spread between Philippine ore and Indonesian domestic ore will become an important factor in subsequent purchasing decisions.

Supply-demand and market sentiment, the Philippine nickel ore market remains in a pattern of relatively loose supply and weak demand. Chinese downstream smelters hold relatively sufficient inventories, purchases are mainly need-based, and improvement in market transactions is limited. With supply pressure not yet significantly alleviated, buyers still hold relatively strong bargaining power. This week, medium- and high-grade ore prices pulled back slightly, reflecting that demand-side support for prices remains limited. For the Indonesian market, weakening domestic nickel ore prices will further compress the import price space for Philippine ore, with price competition pressure likely more pronounced for medium- and low-grade ore.

Looking ahead, Philippine nickel ore supply is expected to remain generally normal over the coming week, but heavy rainfall in Zambales may continue to disrupt production and loading at some mines, and some spot supply may be delayed in the short term, though this is not yet enough to change the overall loose supply pattern. In terms of prices, CIF China prices are expected to remain in the doldrums in the short term. If downstream restocking demand does not improve significantly, some grades may still have room for further downward adjustment. Meanwhile, as Indonesia's local nickel ore prices weaken, CIF Indonesia prices may face stronger downward pressure than the CIF Chinese market. Going forward, the focus will be on the weather recovery in Zambales, loading progress at Philippine mines, Indonesia's local ore prices, and the pace of downstream restocking in China and Indonesia.

Indonesian market:

In terms of prices, Indonesia's nickel ore CIF prices remained broadly stable this week, with Ni 1.4%, 1.5%, and 1.6% quoted at $52.75/wmt, $59.2/wmt, and $64.1/wmt, respectively, little changed from previous prices. Smelters' raw material inventories remain at relatively sufficient levels, restocking willingness is weak, spot trading is generally sluggish, and nickel ore prices have limited upward momentum.

On the HMA front, Indonesia's nickel HMA for the first half of September fell to $16,733.33/mt, down $226.67/mt from the second half of August, a decline of about 1.33%. As a result, the HPM for the first half of September weakened in tandem, with Ni 1.4%, 1.5%, and 1.6% falling to $54.07/wmt, $58.75/wmt, and $63.64/wmt, respectively. The simultaneous weakening of HMA and HPM further lowered benchmark pricing at the mine level while reducing smelters' acceptance of high-priced ore.

In terms of supply, market attention on Indonesia's nickel ore supply shifted notably this week to the actual release of RKAB quotas. Market feedback indicates that several large nickel miners have recently reported receiving additional RKAB quotas, suggesting that production quotas at some mines are being gradually adjusted. The relevant information currently comes mainly from market sources, and the specific approval status and final quotas still need further confirmation, so the market has not yet fully incorporated the related growth into supply expectations. ESDM had previously confirmed that some nickel miners' 2026 RKAB revision applications were approved, but did not disclose the specific additional volumes.

Meanwhile, PT Weda Bay Nickel (WBN) received approval from Indonesian authorities this week and restarted mining operations. Eramet announced on September 10 that WBN has begun gradually resuming production after about four months of care & maintenance. The production resumption is still in a progressive stage, and the pace of the subsequent production ramp-up will depend on the redeployment of contractors and equipment, adjustments to the annual mining plan, and the completion of related administrative work. Eramet is currently unable to provide a reliable estimate of nickel ore production and sales volumes for the remainder of 2026.

On the demand side, smelters' raw material inventories are relatively sufficient, and spot purchases remain primarily need-based. High-grade ore, due to relatively limited local supply, still faces strong procurement competition, with prices remaining relatively firm; meanwhile, Ni 1.3–1.4% ore supply is relatively ample, with some demand continuing to be supplemented by imported ore from the Philippines. Overall, price performance across different nickel ore grades remains clearly divergent.

On the HPM premium side, after the September HMA was lowered, market acceptance of high-premium ore has further declined. Current spot transaction prices for limonite ore remain significantly below the theoretical HPM price, and HPAL enterprises have limited motivation to restock given sufficient raw material inventories. At the same time, the dry season is conducive to mine production and shipments, with supply-side disruptions remaining weak, all of which exert pressure on HPM premiums. If additional RKAB approvals for large mines are further implemented, buyer bargaining power may continue to strengthen, and the discount between actual transaction prices for limonite ore and the theoretical HPM price could widen further.

On the policy front, RKAB became the market's primary focus this week. Compared with the previous stance of simply waiting for policy quota releases, the market is now paying attention to RKAB approvals and actual shipment conditions at specific mines. Reports have recently emerged of multiple large mines obtaining additional quotas; if these are further confirmed and translated into actual supply, they will significantly improve expectations for Indonesian nickel ore supply in Q4. Meanwhile, WBN's approval to resume production has further reinforced expectations of supply-side improvement. However, the government has previously emphasized that RKAB adjustments require formal evaluation, and enterprises submitting adjustment applications does not necessarily mean approval will be granted, so current market reports still need further verification.

On the weather front, Indonesia's major nickel ore producing areas remained generally dry this week, with limited rainfall in Morowali, Konawe, and Obi, and mine production, transportation, and port loading were largely unaffected. Dry weather is favorable for mine shipments in the short term, but persistently low rainfall has also increased water resource pressure in industrial parks such as IMIP. Current market attention on water resource issues is mainly focused on the smelting side, and further observation is needed to see whether it will affect nickel pig iron and stainless steel production.

Looking ahead, supply expectations for the Indonesian nickel ore market have turned somewhat looser in the short term. WBN has received approval and begun a gradual production resumption, while signs have emerged of multiple large mines obtaining additional RKAB quotas; if the relevant information is subsequently confirmed, supply pressure in Q4 may increase further. With demand showing no significant improvement and smelter inventories still relatively sufficient, ore prices are expected to remain in the doldrums. Going forward, the market will focus on the actual implementation of RKAB approvals for large mines, the pace of WBN's production resumption, smelter restocking activity, and changes in HPM premiums.