[recording of the meeting] frequent fluctuations of demon nickel unexpectedly exclusive analysis of nickel price range valuation logic

June 18, 2019, Hiro invited SMM nickel industry senior analyst Duan Chunjing to analyze the nickel market in June, and interpret the terminal consumption of the nickel industry in the second half of the year, smelter maintenance, inventory, and nickel price trends involved in the supply side. "the nickel variety is only called demon nickel," she said. "indeed, the fluctuation of nickel is often unexpected. In fact, from a fundamental point of view, nickel is indeed a relatively weak variety this year. There are two main expectations in the market. One is supply: the new capacity release of ferronickel will replace the demand for pure nickel; The second downstream consumption: stainless steel and new energy do not have a bright performance, the proportion of stainless steel to nickel is certainly getting lower and lower, but the optimistic new energy will not have a significant increase in the past 2 to 3 years. However, the recent market is also concerned that nickel prices are actually relatively strong relative to other colors, the continuous expansion of the back structure, the inverted hanging of Shanghai Ni 1907 and 1909 contracts has expanded to around 1700, this month 1906 to the delivery date is still 16000 hand positions, which in the past basically to the delivery date is only a few thousand hands. In fact, the core issue of the plate feedback is deliverable inventory, because the deliverable inventory is low, the disk has the risk of being forced into position. "

Limited space below mine price

This year, the volume of Indonesian nickel ore exports to China can reach 2700-28 million wet tons, and the total amount of Chinese imports of Indonesian medium and high nickel mines in 2018 was 18.93 million wet tons. There are still some quotas being applied for, and Indonesia's total nickel exports are expected to exceed 30 million wet tons, up 58 per cent from a year earlier. The mine price cost of 1.65 is around US $25.3 / wet ton, which will touch the export cost of the high-cost mine at the latest mine price of US $28 / wet ton in May and US $2.7 / wet ton below. This means that the cost support for the lower boundary is relatively rigid.

Indonesia's blast furnace capacity has now been shut down and the cost of restarting it is close to $13000, which means that nickel prices will rise by more than 13000 and require an extreme shortage of nickel-iron balance sheets, which is now impossible.

At present, the nickel price has approached the cash cost of some high-cost production capacity in China, and the domestic high-cost EF and RKEF enterprises are the first to face the risk of reducing production. When profits narrowed to RKEF costs in Inner Mongolia, about 150000 metal tons of capacity were expected to be phased out, meaning costs fell below the existing $11500, requiring an extreme surplus of nickel-iron balance sheets.

The cost of the following RKEF:

New capacity in Indonesia and China

There was a gradual oversupply of NPI in 2019, with the most obvious increase in supply in the third quarter. NPI prices are expected to continue to fall, nickel pig iron than pure nickel stickers will continue to expand.

Until the price of high nickel iron narrows to the domestic high cost RKEF cost line, clearing out 150000 metal tons of production capacity will be roughly balanced, which means we will see another $11500 of high nickel pig iron in the second half of the year.

This is a very common understanding, demand is not good, inventory is so high. As a matter of fact, the consumption performance of the 300 series this year has been very good. The biggest problem in the first half of the year is not that the consumption is not good, but that the output is too high.

If the steel mills do not make money, and the steel mills do not reduce production, further speaking, if the demand is still high in the previous year, and if the leading index of demand in the second half of the year goes down, the steel mills will be looking for a dead end if they do not reduce production.

Downstream consumption did not improve, stainless steel did not appear seasonal decline:

According to SMM research, the second quarter stainless steel terminal demand is general, downstream agents rigid demand for goods, the current social inventory and steel plant inventory pressure is greater, there is no obvious decline in storage trend, the decline of raw materials in the early stage is greater than the decline of stainless steel, steel mills joint high price, profit repair, short-term stainless steel maintenance and production reduction is expected to be difficult to fulfill, the second quarter supply pressure is greater. In the third quarter, there may be steel mills in the loss, inventory pressure in advance to open a new round of maintenance and production reduction, surplus narrowing.

The high operation of stainless steel production from April to May is expected to decline in stainless steel inventory in the third quarter of 2019:

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SMM teamed up with Hiro to create a high-end report on the metal industry

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Hongze Midao is one of the top independent research institutions in China's capital market, providing macroeconomic, broad asset, emerging industries and corporate analysis and investment strategy services to domestic and foreign institutional investors. The company's core team has an excellent educational background and an average of more than 8 years of financial research or industry experience, and has held core business or management positions in influential investment advisers in the current market.

In the aspect of macroeconomic research, this paper analyzes China's economy from the perspective of first-hand data and globalization, and forecasts and tracks the economic data in an all-round way. We should make a forward-looking review of macroeconomic and industrial policies and grasp the cyclical and structural changes in the economy. Using the perspective of globalization and analytical framework, this paper forecasts the trends of the United States, Europe and major emerging market economies. A top-down prospective study of bond and stock markets in major economies. An investment clock perspective based on macroeconomic and policy cycles provides advice on the allocation of large categories of assets such as stock markets, bond markets, interest rate derivatives, industrial commodities, precious metals and agricultural products.

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SMM nickel report overview:

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