[SMM Analysis] Tight MHP Market and High Payables Amid Supply Constraints and Geopolitical Tensions

This week, the MHP market tightened overall, with nickel and cobalt payables fluctuating at highs. Supply side, Indonesia adjusted its HPM formula, leading to some expectations of cost increases for hydrometallurgical ore, while sulphur supply deficits prompted some producers to plan production cuts, reducing MHP supply and pushing transaction payables higher. Demand side, downstream nickel salt prices showed weakness and the risk of losses persisted, leaving nickel salt smelters relatively less willing to accept high-priced MHP. However, downstream ternary demand recovered somewhat, creating rigid purchasing needs for some producers and supporting stronger MHP nickel payables. Under the influence of tight supply-demand expectations, the market is expected to hold up well in the short term.

The high-grade nickel matte market similarly saw both supply and demand weak. Currently, high-grade nickel matte holds a clear cost 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, constraints from downstream production line compatibility limited actual consumption capacity. Overall purchasing sentiment was subdued, trading activity was low, and payables remained stable.

The international sulphur market continued to tighten, pushing prices higher. Geopolitical tensions in the Middle East remained unresolved, with approximately 1 million mt of loaded sulphur still stranded in the Strait of Hormuz. This was compounded by Turkey’s export ban and Russia’s ban extension, further tightening supply. Major Middle Eastern producers sharply raised their official selling prices in May, with official prices in Kuwait, Qatar, and the UAE all hitting multi-year highs. Although high prices have curbed some demand, the magnitude of supply contraction still far exceeded demand shrinkage, making the strong price trend difficult to reverse. Sulphur prices are expected to stay high. Going forward, close attention should be paid to geopolitical developments and the resumption of transport routes.

Regarding nickel prices, US-Iran tensions triggered market concerns over interest rate hikes this week, leading to a broad pullback in non-ferrous metals. Coupled with disruptions from news on sulphur and quotas, nickel prices fell under pressure. Against the backdrop of rising MHP payables and stable high-grade nickel matte payables, the absolute prices of MHP and high-grade nickel matte declined along with the pullback in nickel prices. Additionally, MHP cobalt prices, similar to refined cobalt prices, remained basically stable. Overall, the intermediate product market is expected to hold up well in the short term.