Nickel Salt Circulation in the Market Tightens, Nickel Ore Supply Increase Still Requires Time [SMM Nickel Morning Meeting Summary]

3.20Nickel Morning Meeting Summary

Nickel Sulphate:                      

On March 19, the SMM battery-grade nickel sulphate index price was 27,867 yuan/mt, with the quotation range for battery-grade nickel sulphate at 27,800-28,400 yuan/mt, and the average price remained unchanged from the previous day.

Cost side, this week, some traders raised the pricing coefficient of cobalt in MHP by about 5 points. The MHP coefficient remains at a high level, and currently, there is insufficient downward momentum for raw material coefficients throughout Q2. Yesterday, LME nickel prices declined slightly compared to the previous day, weakening cost support for nickel salt smelters. However, sentiment to stand firm on quotes persists among smelters, and this has not yet been transmitted to the nickel salt market. Demand side, fluctuations in the cobalt market have slowed the procurement pace of precursor plants, though some still exhibit just-in-time stocking demand. Supply side, raw material prices fluctuated at high levels, and sentiment to stand firm on quotes spread among nickel salt smelters. Nickel salt smelters' inventory levels remain low, and market circulation of nickel salts is tightening. In summary, considering the persistent demand in the market, low inventory levels at nickel salt smelters, and their sentiment to stand firm on quotes, nickel salt prices are expected to have further upward potential in the short term.

Nickel Pig Iron (NPI):

On March 19, the SMM 8-12% high-grade NPI average price was 1,017.5 yuan/mtu (ex-factory, tax included), up 3 yuan/mtu from the previous working day. Supply side, domestically, as the rainy season in the Philippines nears its end, it will still take time for nickel ore shipments to increase. Nickel ore prices remain stable, and smelters' production momentum is weak, with production running at low levels. In Indonesia, recent abundant rainfall combined with tight nickel ore supply has kept smelters' nickel ore inventories at low levels. With the release of new capacity, production has only seen slight growth. Demand side, stainless steel futures orders were relatively strong, and with stainless steel scrap prices rising alongside finished product prices, the economic advantage of stainless steel scrap has weakened. This has warmed stainless steel mills' sentiment for high-grade NPI procurement, and market inquiries have been active. In the short term, high-grade NPI costs are expected to strengthen, and with tightening supply and demand, prices are likely to remain relatively stable with a strong trend.

Stainless Steel:

According to the SMM survey, on March 19, stainless steel market prices were relatively stable with a downward trend. The most-traded SS2505 futures contract fluctuated downward, and as transfer to delivery warehouse progressed, prices declined. At 10:30 a.m., the SS2505 quotation was 13,450 yuan/mt, down 95 yuan/mt. In Wuxi, the spot premiums and discounts for 304/2B were in the range of -70 to 290 yuan/mt.

Spot side, the price of 201/2B coils declined. The average price in Wuxi was 7,810 yuan/mt, down 10 yuan/mt from the previous day, while in Foshan, the average price was also 7,810 yuan/mt, with a drop of 20 yuan/mt. For 304/2B coil trimmed-edge prices, the average price in Wuxi was 13,460 yuan/mt, down 10 yuan/mt, while in Foshan, the average price remained at 13,350 yuan/mt, unchanged from the previous day. Prices for 316L/2B coils were relatively stable, with average prices in Wuxi and Foshan at 24,125 yuan/mt and 24,175 yuan/mt, respectively, with no price changes. For 430/2B coils, the average price in Wuxi was 7,440 yuan/mt, and in Foshan, it was 7,330 yuan/mt, with prices in both regions remaining stable.

Downstream market, demand remained weak, and procurement activities were primarily just-in-time, resulting in mediocre overall market transactions, which failed to provide strong support for prices.

Nickel Ore:

Last week, in the Philippine low-grade high-iron ore market, prices remained stable overall, with weak overall demand from domestic plants. Under losses, acceptance of price increases was limited. For low-grade nickel ore, there were few transactions this week, and prices remained stable. For medium- and high-grade nickel ore, influenced by rising Indonesian ore prices, Philippine mines maintained sentiment to stand firm on quotes, and mine offer prices increased. Supply side, the southern major mining areas are at the end of the rainy season, but the impact persists. Looking ahead, shipments from the Philippines are expected to increase. Demand side, the continuous rise in NPI prices has boosted nickel ore prices, and smelters' medium- and high-grade nickel ore inventories are at low levels, with strong restocking demand from plants. Ocean freight rate, some rates have reached $11/mt. As the rainy season in the southern major mining areas ends, the shift in shipment locations may lead to an increase in ocean freight rates. In summary, with strong supply and demand, SMM expects Philippine prices to fluctuate upward in the future.

Current market transaction prices: For pyrometallurgical ore, the mainstream premium price for Indonesian nickel ore on Sulawesi Island in March was $19-21/wmt. The SMM delivery-to-factory price range for 1.2% laterite nickel ore in the Indonesian market was $25.5-27.5/wmt, while for 1.6% laterite nickel ore, it was $46.5-51.5/wmt. For the first half of March, the HPM price for 1.2% grade nickel ore was $15.49/wmt, and for 1.6% grade nickel ore, it was $27.01/wmt. The HPM for the second half of March will be announced around March 15. Supply and demand, compared to last week, the structure showed no significant changes. Supply side, as the rainy season gradually ends, supply is expected to improve. Demand side, smelters continued just-in-time procurement, and shipment activity warmed up during the week. Inventory, downstream smelters' inventory levels remained low, and procurement demand persisted. While supply loosened slightly, market concerns over nickel ore supply due to policy uncertainties remained. With downstream smelters maintaining gradual increases in nickel ore demand and low inventory levels, SMM expects that despite the anticipated increase in supply, strong supply and demand will continue to support prices. Policy side, following changes to the HPM pricing formula and foreign exchange control policies, discussions are ongoing regarding an increase in nickel ore royalties. The market holds strong expectations for this policy to be implemented within the year. If implemented, it will directly lead to a significant increase in mining costs. With strong bargaining power on the seller's side in the nickel ore market, the costs caused by royalties are likely to be largely passed on to downstream buyers, driving up nickel ore prices.