[SMM Analysis] Downstream Demand Shows No Improvement as Nickel Intermediate Prices Diverge

Downstream Demand Shows No Improvement as Nickel Intermediate Prices Diverge

The MHP market remained relatively well supplied this week, while nickel and cobalt payables continued to weaken. On the supply side, some producers resumed MHP output after replenishing their sulphur supplies, while some trading firms released inventory, adding to spot availability. Although some producers continued to cut output because of high raw material costs, overall supply remained ample. On the demand side, downstream nickel and cobalt salt prices stayed weak, and cobalt sulphate producers continued to face cost pressure as production costs exceeded selling prices. Salt producers showed limited willingness to accept high priced MHP, pushing MHP payables lower. With ample spot supply and cautious downstream buying, MHP payables may remain weak in the near term.

The high grade nickel matte market continued to face weakness on both the supply and demand sides. Although high grade matte currently offers a clear cost advantage over MHP, major suppliers have already committed volumes under long term contracts, leaving limited spot material available. On the demand side, limited compatibility with downstream production lines has constrained actual consumption, so the cost advantage has yet to translate into additional purchases. Buying interest remained subdued, trading was thin, and high grade matte payables held steady.

Sulphur prices on a CIF Indonesia basis fell to $950–1,030 per tonne this week, averaging $990 per tonne, down $15 per tonne from last Friday’s average of $1,005 per tonne. MHP producers continued to resist high sulphur prices amid cost pressure, and prices edged lower as buyers and sellers negotiated. On the news front, the US and Iran held diplomatic contacts in New York covering issues including the maritime blockade, frozen assets and passage through the Strait of Hormuz. The progress of these talks, and whether any lifting of the blockade materially affects Middle Eastern sulphur supply and shipping, will bear watching. Sulphur prices are expected to fluctuate at elevated levels next week, leaving MHP producers’ raw material cost pressure unlikely to ease significantly in the near term.

Benchmark nickel prices rebounded this week, supported by reports of NPI production cuts in Indonesia and some short covering ahead of the holiday. For MHP, weaker nickel payables more than offset the rise in benchmark nickel prices, causing its nickel component price to decline. High grade matte payables held steady, allowing its nickel component price to rise with the benchmark. Meanwhile, continued declines in cobalt payables drove a sharp drop in MHP’s cobalt component price. Overall, the nickel price rebound has yet to change downstream buyers’ cautious approach, and the nickel intermediates market is likely to remain under pressure in the near term.