[SMM Analysis] Affected by the Supply-Demand Relationship, MHP and High-Grade Nickel Matte Prices Rose This Week

MHP market, supply tightness was the core market contradiction this week, driving payables higher. Affected by the tailings dam landslide at Indonesia Morowali Industrial Park (IMIP) in February, some HPAL projects in the park operated at low rates and this is expected to continue for several more weeks. Meanwhile, potential accountability measures by the Indonesian government may bring the risk of license revocations, and together with uncertainty over sulfur supply caused by the Middle East situation, the risk of tight MHP raw material supply increased, further strengthening expectations of market supply contraction. In addition, IUI approval for a new MHP project was still in process, limiting short-term supply growth.

Demand side, March was the traditional peak season for new energy, and coupled with some downstream enterprises rushing to export, overall demand improved and enterprises became more willing to procure. Although spot transactions appeared sluggish, with buyers and sellers waiting for guidance from the Papua New Guinea tender results, the supply-demand relationship had already pushed payables higher. As downstream stocking demand is gradually released, MHP nickel payables and cobalt payables are expected to be unlikely to decline.

High-grade nickel matte market, the supply-demand relationship remained in a tight balance, and nickel payables were flat WoW. Mainstream sellers had basically sold out their Q1 cargoes, with limited circulation in the spot market, and some sellers had stopped offering. As high-grade nickel matte itself saw limited production growth and its role as a supplementary substitute raw material for MHP became increasingly evident, nickel payables are expected to be unlikely to decline amid tight supply and strong willingness among sellers to hold prices firm.

As for sulfur, a key auxiliary material, sulfur prices continued to rise this week under the impact of expected supply-side reductions. Although Qatar's March sulfur contract price was flat MoM at FOB $520/mt, the Middle East situation remained deadlocked, and prices from the region could not be transacted in practice, forcing enterprises to seek other import sources. Given the uncertainty of the Middle East situation, sulfur prices were more likely to rise than fall in the later period. The direction of the Middle East situation and the realization of subsequent port arrivals will determine the final trend.

Nickel prices, at the beginning of the week, the US dollar index strengthened, and together with safe-haven sentiment triggered by tense geopolitical conditions in the Middle East, this pressured nonferrous metal prices. However, Indonesia's policy of tightening nickel ore supply remained unchanged and was still the core driver on the supply side, so nickel prices rose WoW. In terms of payables, nickel prices for both MHP and high-grade nickel matte rose overall this week, while cobalt prices in MHP also increased as payables moved higher.