LME Nickel Prices Fluctuate at High Levels; Severe Losses for Nickel Salt Smelters [SMM Nickel Morning Meeting Summary]

3.17Nickel Morning Meeting Summary

Refined Nickel:

Last week, nickel prices maintained a strong upward trend, successfully breaking through 135,000 yuan on Friday, driven by the tin market. Although market sentiment weakened slightly, it remained dominant. Spot premiums for Jinchuan-brand nickel declined this week, possibly due to traders lowering prices to boost transactions, but deals still fell short of expectations, with end-users mainly adopting a wait-and-see approach. Nickel sulphate prices continued to rise, with the price spread between nickel sulphate and refined nickel remaining in a discount state. On the macro front, the US Federal Reserve's February CPI data came in below market expectations, fueling expectations of an interest rate cut, which pushed up the most-traded nickel prices. Meanwhile, the rainy season in the Philippines is nearing its end, and nickel ore shipments are expected to increase, but current supply remains tight. Prices of medium- and high-grade nickel ore softened slightly, while Indonesian nickel ore prices remained stable with a strong trend. Absolute prices are expected to rise, albeit at a slower pace. The Indonesian Ministry of Energy and Mineral Resources' new policy adjusting the HPM pricing method caused some market sentiment fluctuations. Fundamentally, tight domestic nickel ore supply weakened production incentives for smelters, while Indonesian NPI production remained stable. Downstream, stainless steel production schedules are expected to increase, and the tightening supply-demand relationship for high-grade NPI supports relatively stable prices with a strong trend. SHFE nickel prices are expected to continue being influenced by a combination of sentiment and fundamentals next week, with potential narrowing in price fluctuations.

Nickel Sulphate:                      

Last week, the SMM battery-grade nickel sulphate index price was 27,660 yuan/mt, with a quotation range of 27,600-28,200 yuan/mt, and the average price increased WoW. This week, nickel salt market prices showed an upward trend, mainly driven by cost side and supply-demand dynamics.

Last week, the overall circulation in the nickel salt market was limited. On the supply side, high LME nickel prices caused severe losses for nickel salt smelters, further boosting their sentiment to stand firm on quotes. Some nickel salt smelters may consider production cuts due to pressure from losses, with current inventory levels remaining low. On the demand side, although precursor plants have not yet completed their just-in-time stockpiling for March, restocking demand still exists. However, rising raw material costs have led to significant losses for precursor plants, slowing their procurement pace. Overall, tight supply-demand dynamics and rising costs jointly supported further increases in nickel salt prices.

Considering these factors, the nickel salt market last week experienced continuous price increases driven by tight supply, existing demand, and cost support. This trend is expected to persist in the short term.

NPI:

Last week, the weekly average price of SMM 8-12% high-grade NPI was 1,001.5 yuan/mtu (ex-factory, tax included), up by 13.7 yuan/mtu WoW. The Indonesian NPI FOB index rose by $2.1/mtu WoW. This week, high-grade NPI prices continued to rise. On the supply side, domestically, the release of Philippine nickel ore still requires time, and domestic smelters mainly consumed previous inventories, with production running at low levels. In Indonesia, smelters' nickel ore inventories remained low, and production ramp-up faced difficulties. Additionally, a major smelter continued to operate at low capacity. With the release of some new capacity, total production saw a slight increase. On the demand side, the stainless steel market showed active order-taking sentiment during the week, with finished product prices hitting consecutive new highs. Stainless steel mills' procurement sentiment for raw materials improved, and transaction prices continued to reach new highs during the week. In the short term, high-grade NPI prices are expected to remain relatively stable with a strong trend.

Stainless Steel:

Last week, stainless steel futures and spot prices showed a strong upward trend, with varying degrees of price increases in major circulation markets such as Wuxi and Foshan. In the futures market, the most-traded SS2505 contract fluctuated at high levels, showing an overall upward trend. As of 10:30 a.m. on Friday, the SS2505 contract was quoted at 13,680 yuan/mt, a significant increase from the beginning of the week. In the spot market, prices for 200-series, 300-series, and 400-series stainless steel rose to varying degrees across multiple regions. In Wuxi, the average price of 201/2B coils was 7,830 yuan/mt, while in Foshan, prices for 304 specifications increased by 20-75 yuan/mt.

Nickel Ore:

Last week, in the Philippine low-grade nickel ore market, prices remained stable overall, with weak domestic demand and limited acceptance of price increases due to losses. For low-grade nickel ore, there were few transactions this week, and prices remained stable. For medium- and high-grade nickel ore, influenced by rising Indonesian ore prices, Philippine mines maintained their sentiment to stand firm on quotes, and offer prices increased. On the supply side, the rainy season in southern major mining areas is nearing its end, but its impact persists. Looking ahead, Philippine shipments are expected to increase. On the demand side, the continuous rise in NPI prices has boosted nickel ore prices, and smelters' inventories of medium- and high-grade nickel ore remain low, with strong restocking demand. Regarding ocean freight rates, some rates have reached $11/mt. As the rainy season in southern major mining areas ends and shipping locations shift, ocean freight rates may rise. In summary, with strong supply and demand, SMM expects Philippine prices to fluctuate upward in the future.

Current market transaction prices: For pyrometallurgical ore, the mainstream premium price for Indonesian nickel ore in March at major K islands was $19-21/wmt. SMM Indonesian domestic laterite nickel ore 1.2% (delivery-to-factory price) price range was $25.5-27.5/wmt; SMM Indonesian domestic laterite nickel ore 1.6% (delivery-to-factory price) price range was $46.5-51.5/wmt. In the first half of March, 1.2% grade nickel ore HPM was $15.49/wmt, and 1.6% grade nickel ore HPM was $27.01/wmt. The second half HPM will be announced around March 15. Regarding supply-demand conditions, there were no significant changes compared to last week. On the supply side, as the rainy season gradually ends, supply is expected to improve. On the demand side, smelters continued just-in-time procurement, and shipment activity during the week continued to recover. Inventory levels at downstream smelters remained low, with ongoing procurement demand. Although supply is expected to improve, market concerns about nickel ore supply persist due to policy uncertainties. With downstream smelters maintaining steady demand and low inventory levels, SMM expects that despite increasing supply, strong supply-demand dynamics will continue to support prices. On the policy front, following changes to the HPM pricing formula and foreign exchange control policies, discussions are underway regarding an increase in nickel ore royalties. The market holds strong expectations for the policy to be implemented within the year. If implemented, it will directly lead to significant cost increases for mines. With strong bargaining power on the seller's side in the nickel ore market, the cost increase caused by royalties is likely to be largely passed on to downstream buyers, driving up nickel ore prices.