Overnight SHFE Nickel Recorded Losses of Over 10%, Correction amid Weakening Supply and Demand?

SHANGHAI, Mar 28 (SMM) - SHFE nickel dropped more than 10% last Friday night, which might indicated the correction of nickel prices. And the violently fluctuating nickel prices amid money game have brought great trouble to the spot market. The trading volume of LME nickel declined significantly after experiencing violent fluctuations last week. After a short correction trend on Monday and Tuesday, LME nickel touched limit up for two consecutive days due to the influence of money games and the amplification under low trading volume. The expectation of downstream procurement is also sluggish amid great uncertainties certering the futures market. At present, nickel sulphate manufacturers and NI-MH battery factories maintained production curtailment. In addition, due to the impact of the pandemic, spot transportation and delivery have been delayed. The supply of nickel sulphate was relatively tight as a result of the short supply of raw materials. Whether the output of high-grade nickel matte could increase substantially is the key point that affects the supply to new energy sector and alleviates the supply tightness of nickel briquette. However, the current production of nickel matte has not yet met expectations. The prices of SHFE nickel continued to rise under the impact of LME nickel. At present, the prices of nickel have largely deviated from the fundamentals due to the money game. On the whole, the market shall closely watch LME nickel for a clue that guides SHFE nickel.

Pure nickel: The trading volume of LME nickel declined significantly after experiencing violent fluctuations last week. After a short correction trend on Monday and Tuesday, LME nickel touched limit up for two consecutive days due to the influence of money games and the amplification under low trading volume. SHFE 2204 nickel has been rising since last Tuesday tailing LME nickel, and touched the weekly high at 281,250 yuan/mt. In terms of spot, the sharp fluctuations in nickel prices have also brought great trouble to spot traders. The overall transaction was weak last week, and the main transactions were concentrated on the occasion of market correction on Monday and Tuesday. After Wednesday, due to the high futures prices and great uncertainty, expectation of downstream purchase was weak. The upstream quotations and shipments were also more cautious. In addition, the traders have stopped making quotations on Thursday as they could not close their positions for hedging when the futures hit limit up again. In addition, due to the impact of the pandemic, the transportation and delivery of spot goods have been delayed. In terms of nickel briquette, due to the large price difference between SHFE and LME prices for a long time, the tight supply of briquette in the market remains unchanged. At present, the cost efficiency of self-dissolution of nickel briquette in nickel sulphate factories is still poor, and some manufacturers chose to reduce or stop the production, and some even sold their nickel briquette stocks. However, due to cost efficiency problems, terminals generally stopped picking up goods. To sum up, the current pure nickel market presents a pattern of weak supply and demand.

NPI: The SMM average price of 8-12% high-grade NPI stood at 1,635 yuan/mtu (ex-works, including tax) on Friday March 25, up 10 yuan/mtu from a week earlier, and the average price of Indonesia NPI stood at 1,647.5 yuan/mtu (including tax, delivery to ports), 10 yuan/mtu higher than a week earlier. The traded price with mainstream steel mills was 1,630 yuan/mtu (arrival at the factory, including tax). At the time when nickel prices fluctuated wildly, the market reservoir would cast a certain influence on the NPI prices. In the later period, nickel futures surged again, and the market quotation returned to a high level. On the demand side, although the spot prices of stainless steel moved up following the futures prices, the downstream transaction was less than expected. Besides, due to the influence of the COVID-19, the profit margin of steel mills could hardly realise, so they were cautious about high-priced raw materials. Moreover, nickel prices fluctuated abnormally, so the steel mills held a wait-and-see attitude to avoid the cost risk. On the supply side, quotes of NPI plants and traders were still high, which was supported by the gap between supply and demand and the low inventory in steel mills.  What’s more, the spread between pure nickel and NPI was large, and upstream held firm to the prices. In addition, the cost of NPI plants was supported by high nickel ore prices and the higher electricity bill. And due to the COVID-19, the transportation cost of NPI increased. Therefore, NIP prices are unlikely to fall. It is expected that the prices of NPI will remain at 1,610-1,680 yuan/mtu (ex-factory, including tax).

Nickel Sulphate: As of Friday March 25, battery-grade and electroplating-grade nickel sulphate recorded 47,000-49,000 yuan/mt and 50,000-53,000 yuan/mt respectively. Nickel futures staged a dramatic scene again last week, and prices continued to rise and fall drastically. The abnormal fluctuations of nickel prices under the money game have not yet subsided. The wildly fluctuating nickel prices have brought great trouble to the spot market of nickel sulphate. At present, under the current nickel market landscape, the spot market trading in all nickel-related sectors are basically stagnant, according to SMM research. Unreasonable fluctuations in nickel prices mainly affect the two following aspects: 1. Raw materials prices like MHP/MSP/nickel briquette, that are settled based on futures prices, especially LME nickel, have seen forced up. And the downstream refuses to purchase under small orders when import losses are obvious, and the long-term orders are also mostly under negotiation. 2 The market sentiment has been on edge for lack of clear guidance. The upstream and downstream are cautious in making quotations and shipments, and are mainly in a wait-and-see state. However, as the end of the month is approaching, some precursor companies still have procurement demand. With such fluctuations in nickel prices, the procurement cycle is forced to be delayed, and companies may face challenges in production and order delivery. Entities are currently in a dilemma and have to survive. It is expected that the prices of nickel may correct this week. But according to current expectations, the process will take longer time. Traded prices of battery-grade nickel sulphate are expected to stand at 47,000-52,000 yuan/mt amid the game between supply and demand sides. And the prices of electroplating-grade nickel sulphate will move between 50,000-54,000 yuan/mt.

Stainless Steel: Due to the influence of the pandemic, the trading of stainless steel spots was slack, and the arrivals at steel mills and market shipments were both restricted. In the case of unstable prices and operating rates affected by the pandemic, some downstream processing companies only purchased on rigid demand. According to some traders, the trading volume was more than halved based on the average level. The shipment of stainless steel will be exposed to further restrictions because a driver in Wuxi Oriental Steel Mall got a positive result in nucleic acid test last Friday night. Last week, driven by the rising SS contract, the spot prices were high. However, the actual shipment born huge pressure and the spot prices could not catch up with the trend. It is expected that the stainless steel spot prices will be stable with possibilities of falling. The market should keep an eye on the driving force of the demand on the resumption of downstream production when the COVID-19 outbreak eases.