High-Grade NPI and Refined Nickel Prices Remain Under Pressure Amid Weak Stainless Steel Market

This week, the average price of SMM 8-12% high-grade NPI reached 952.2 yuan per mtu (ex-factory, tax included), down 10 yuan per mtu compared to last week. Meanwhile, the Indonesian NPI FOB index decreased by $1.6 per mtu WoW. The decline in high-grade NPI prices slowed this week.

Supply side, in the domestic market, due to the decline in finished product prices, smelters continued to operate at a loss, reducing production motivation and maintaining stable operations. On the other hand, in Indonesia, new capacity gradually increased. Despite the reduced profits from high-grade nickel matte, the motivation to switch to high-grade NPI production strengthened, leading to an overall expansion in production.

Demand side, stainless steel spot prices stabilized, and social inventory slightly decreased. Major steel mills are expected to gradually release new capacity by year-end, thus stainless steel production is expected to rise, providing strong support for high-grade NPI demand. However, as it is currently the off-season for stainless steel consumption, supply and demand surplus is evident, posing a downside risk to stainless steel spot prices, which in turn puts pressure on high-grade NPI prices. Therefore, high-grade NPI prices may remain stable with a weak trend in the short term.

Additionally, this week, the average discount of high-grade NPI compared to refined nickel was 304.1 yuan per mtu, narrowing by 1 yuan per mtu WoW. After a period of fluctuating decline, high-grade NPI prices began to stabilize, with top-tier enterprises releasing demand for raw material inventory replenishment, leading to slightly weaker transaction prices compared to the previous period.

Regarding refined nickel, influenced by the weakening US dollar index and insufficient market consumption confidence, the overall performance of non-ferrous metals was weak. On the information front, the Indonesian government's new Simbara system may disrupt the approval of nickel ore RKAB next year. According to SMM, Indonesia has approved a plan for 247 million wmt by 2025, with limited direct impact on market sentiment from the mine side. Fundamentally, the increase in alloy orders at year-end boosted nickel plate demand, coupled with continued export profitability, improving the fundamentals of refined nickel. Nickel prices showed sideways movement this week.

In summary, in the short term, high-grade NPI prices may continue to be dragged down by the weak fundamentals of the stainless steel market, with further downside risk, but the downside space is limited due to cost support from the mine side. Refined nickel prices, lacking favourable macro front stimuli and without significant fundamental improvement, are expected to continue fluctuating rangebound. Next week, the average discount of high-grade NPI compared to refined nickel is expected to narrow slightly.