[SMM Analysis] Downstream Demand Shows No Significant Recovery, Nickel Intermediate Product Payables in the Doldrums This Week

Downstream demand has not shown a significant recovery, and intermediate product payables remained in the doldrums this week.

The MHP market supply-demand pattern remained relatively loose this week, with nickel payables and cobalt payables staying weak. On the supply side, after sulphur replenishment, some producers resumed MHP production to a certain extent, while some traders also released inventory to some degree. Although some enterprises still cut production due to poor production economics, overall market availability was relatively ample. On the demand side, downstream nickel salt and cobalt salt prices remained sluggish, and monetizing cobalt sulphate production was relatively difficult. Salt producers showed relatively low acceptance of high-priced MHP, leading to a continued decline in MHP payables recently. Under the pattern of rising supply and weak demand, MHP payables are likely to remain weak in the short term. However, as payables are about to fall to the window where externally purchased MHP becomes economical for refined nickel production, the downside for nickel payables is expected to be relatively limited.

The high-grade nickel matte market continued to see weak supply and demand. Currently, high-grade nickel matte holds a clear economic advantage over MHP, but on the supply side, mainstream suppliers have already completed long-term order signing, leaving limited spot cargo available. On the demand side, constrained by downstream production line compatibility, actual consumption capacity is insufficient, and the economic advantage has yet to translate into purchasing growth. Overall, market purchasing sentiment was weak, trading activity was low, and high-grade nickel matte payable indicators remained stable.

This week, sulphur prices (CIF Indonesia) fell to the $950-980/mt range, averaging $965/mt, down $35/mt from last Friday's average of $990/mt. On Middle East supply, Qatar's Ras Laffan has been running at low loads since the March attack, with about 17% of capacity affected, and sulphur flows through the Strait of Hormuz have yet to see significant relief. However, actual transactions of Canadian cargo in the market drove expectations lower, and supply substitution is easing some of the tightness. Southeast Asian markets broadly rejected offers above $1,000/mt. Prices are expected to consolidate at highs next week, with focus on whether Middle East official contract prices will be lowered in October.

On nickel prices, nickel prices weakened further this week, mainly pressured by macro expectations of interest rate hikes. MHP and high-grade nickel matte prices declined this week in tandem with nickel prices. In addition, MHP cobalt prices fell sharply due to lower cobalt payables. Overall, the intermediate product market is expected to be under pressure in the short term.