Short-term Nickel Ore Prices Are Unlikely to Fall Significantly Despite Palpable Import Growth in May

SHANGHAI, Jun 22 (SMM) - According to the General Administration of Customs, China's imports of nickel ore and concentrates in May were 3.84 million mt, an increase of 54.73% month-on-month and a year-on-year increase of 4.59%. Among them, the shipments from China’s largest supplier, the Philippines, continued to recover, which rose nearly 80% month-on-month, but was still lower than the same period last year.

Price analysis

With the increase of ore imports and the sluggish domestic stainless steel and NPI markets, the prices of NPI have gradually declined and approached the cost line, which has put pressure on the prices of nickel ore on the backdrop of low profit margins. Nickel ore prices have declined recently, but the overall decline was mild. The main reason is that the port inventory of nickel ore has been at a historical low, adn the supply tightness has extended for some time although the imports of nickel ore to China have gradually increased with the improvement of the weather in the Philippines.

From March 16 to April 6, 2022, the average price of Ni 1.5% laterite nickel ore (CIF) from the Philippines reached the highest level this year at $102.5/wmt, and dropped to $88.5/wmt as of June 21, a decrease of 13.66% .

As of June 17, nickel ore inventory at Chinese ports rose 11,000 wmt to 4.88 million wmt or 38,000 mt in Ni content. Nickel ore stocks across seven major Chinese ports stood at 2.01 million wmt, down 49,000 wmt on a weekly basis.

As is reasoned by SMM, after the rainy season in the Philippines ended, nickel ore should have been shipped in large quantities from the country. However, the expectation of sufficient supply of nickel ores has not been realised, and there is always a supply shortage on the ore end. The main cause is that the weather condition in the Philippines was poor in the first half of the year, and the rainy season ended later than expected, which made the export volume of local nickel ore less than expected. The constantly falling nickel ore inventory at ports indicated that domestic nickel ore supply has been in short since the beginning of the year. And the supply tightness is expected to stay in place for some time into the near future.

The ocean freight from the Philippines to China on June 17 stood at $23.5-24.5/mt (the Philippines to southern Chinese ports-the Philippines to northern Chinese ports), flat from a week earlier. The Philippines has passed the rainy season. The increase in nickel ore shipments has created a strong demand for ships, and the ocean freight remains high, coupled with high crude oil prices. However, according to research, new inquiries for ultra-handy ships in Asia are limited, and it is expected that the follow-up ocean freight may remain rangebound.

On the whole, SMM expects that the subsequent fall in the prices of nickel ore will be limited compared to that of NPI. Ni 1.5% ore prices are expected to stand at $81-85/wmt this week on a cif basis.