SMM Nickel Market Morning Comment Fully (Apr 8)

SHFE nickel performed well last week. Since March 28, the nickel price has risen for five consecutive days. As of April 3, it grew to 133,450 yuan/mt. Recently, the nickel ore quota is still the center of attention. The nickel ore approval in Indonesia is slower than expected, leading to no new quota in the past two weeks. Indonesian HPM rose by about $3/wmt in April. On this basis, the local nickel ore premium remained high, with the overall tight supply. As the United States, Japan and the Philippines are estimated to start nickel supply cooperation after the meeting on April 11, the market now has begun to worry about its impact on China’s import price of Philippine ore, and whether it could impact the production of domestic smelters. Currently, the market has speculated on whether the Fed will cut interest rates in June. Aditya Bhave’s analyst team at Bank of America released a research report on Tuesday local time, pointing out that considering the base effect of year-on-year core PCE inflation, the best time to cut interest rates this year may be in the first half. Fundamentally, the nickel plate supply continues to increase. Although imports under long-term orders have decreased compared with last year, imported nickel plates still lead to ample supply. In summary, the nickel price is mainly influenced by the industrial chain and macro environment in the short run, rather than refined nickel market fundamentals.

Nickel: Last week, the SHFE nickel continuous contract showed a bias towards strength, with nickel rising for five consecutive days since March 28th. As of the close on April 3rd, the nickel price had risen to 133,450 yuan/mt. The conflict that the market has been focusing on recently remains the nickel ore quotas. The approval speed for Indonesian nickel ore quotas is slower than expected, and there have been no new approved nickel ore quotas in the past two weeks. The April HPM in Indonesia rose by about $3/wmt, and based on this, the local nickel ore premium continues to remain high, indicating overall tightness in local nickel ore supply. On the other hand, last week, the disclosure of the expected cooperation in nickel supply among the US, Japan, and the Philippines, which is expected to begin after April 11th, has raised concerns in the market about the potential impact on future import prices of Filipino mines and whether it will affect domestic smelter production again. Macroscopically, the market is currently speculating on whether the Fed will start cutting interest rates in June. Aditya Bhave, an analyst at Bank of America, released a research report last Tuesday stating that due to the base effect of core PCE inflation year-on-year, it will be favorable until May, but unfavorable for 6 out of the 7 months in the year-end, indicating that the best time for rate cuts this year may be in the first half of the year. From a fundamental perspective, nickel plate supply continues to increase incrementally. Although overseas long-term contracts have decreased in scale compared to last year, the import of nickel plates still affects the domestic supply and demand balance, which continues to lean towards loose expectations. Overall, in the short term, the logic of nickel prices revolves around the industry chain and macro level. The influence of the fundamental factors of pure nickel on nickel prices is relatively weak in the short term.

Nickel Sulfate: On April 3rd, the SMM battery-grade nickel sulfate index price was 30,550 yuan/ton, down 100 yuan/mt from the previous Friday, and the battery-grade nickel sulfate price ranged from 30,400 to 30,800 yuan/mt, with an average price down 150 yuan/mt from the previous Friday. The current transaction activity has weakened, with the transaction center biased towards the lower end. Downstream acceptance of high-priced nickel sulfate has gradually decreased, and the overall transaction price range has shifted downwards. However, due to relatively tight spot supply in early April, the decrease in prices is less than the increase. In terms of cost, the prices of MHP and nickel matte remained stable last week, and with the comprehensive fluctuation of nickel prices, the cost side remained stable last week. Risk alert: If a leading enterprise releases a significant portion of nickel sulfate, the tightness in the spot market may gradually ease, and there may still be downward risks to the future price of nickel sulfate. Future perspectives: After the holiday, the signing point for orders in the middle and late April, there may still be downward risks in the price of nickel sulfate, consistent with the perspectives of the previous week, with no changes for now.

Ferronickel: Last week, the average price of SMM 8-12% NPI was 930 yuan/mtu (including tax), down 1.7 yuan/mtu from the previous week, showing a downward trend in ferronickel prices during the week. From the supply side, although the approval speed for nickel ore quotas has recently increased significantly, it still takes time from the mine to the smelter, so it is expected that nickel iron production during March will remain low. From the demand side, the downstream and terminal demand for stainless steel is relatively weak, and steel mills are finding it difficult to digest the backlog of inventories. The price of stainless steel is showing a unilateral downward trend, breaking through the cost line, and steel mills' purchasing intentions are low with weak demand. Overall, the imbalance between supply and demand for ferronickel continues, and it is expected that the current ferronickel prices will remain weak.

Stainless Steel: Last week, spot prices of stainless steel stabilized after hitting bottom. On April 3rd, the SMM 304 cold-rolled burr edge was quoted at 13,300-13,700 yuan/mt, showing a continued downward trend compared to the previous week. The SS contract main force experienced a sharp rebound after a deep fall, with the lowest point falling to 13,150 yuan/ton. Last week, steel mills' opening prices were slightly more relaxed than the previous week, and after hitting bottom, spot transactions slightly improved. Steel mills' announced rebates fell short of expectations, prompting agent traders to raise prices to maintain profits. With the strengthening of the agency's price support mentality, low-price resources decreased, and spot prices gradually stabilized. As for social inventories, the amount of arrivals recovered last week, but overall social inventories were mainly reduced, with significant digestion of 300 cold and hot-rolled products in Wuxi. Foshan region faced some pressure in hot-rolled products, while for 200 series stainless steel, there was a concentration of arrivals before the holiday, coupled with the end of downstream stockpiling, resulting in a certain level of accumulation last week. However, for 400 series, both supply and demand weakened, and destocking situation was relatively better. Production reduction intensity in April was relatively small, and it is expected that subsequent spot prices may continue to be weak.