High-Grade NPI Cost Support Strengthens Stainless Steel Market in Stalemate [SMM Nickel Morning Meeting Summary]

3.21 Nickel Morning Meeting Summary

Pure Nickel: SMM March 20th News: Spot premiums and discounts: The mainstream spot premium quotation range for Jinchuan No. 1 nickel was 1,800-1,900 yuan/mt, with an average premium of 1,850 yuan/mt, up 50 yuan/mt from the previous trading day. The premiums and discounts for Russian nickel ranged from -200 to 100 yuan/mt, with an average discount of -50 yuan/mt, unchanged from the previous trading day. Futures: Today, nickel prices showed a fluctuating trend at the opening. As of 11:30, the closing price was 129,686 yuan/mt, down 1.31% from the previous trading day's settlement price, with the lowest point reaching 127,940 yuan/mt. In terms of spot premiums and discounts, the Jinchuan brand nickel increased by 50 yuan compared to the previous trading day. This increase was mainly due to the night session's decline, leading traders to appropriately raise premiums to seek profits. From a technical perspective, SHFE nickel futures contracts showed a downward trend after the opening, possibly due to cooling speculative sentiment from Indonesia, causing some long positions to reduce their holdings. With prices falling back below the 130,000 yuan/mt level, overall market sentiment appeared cautious. Regarding the price spread with nickel sulphate: Today, the SMM1# refined nickel price was 127,800-131,000 yuan/mt, with an average price of 129,400 yuan/mt, down 1,625 yuan/mt from the previous trading day's spot price. The price difference was 1,673 yuan/mt (Ni contained), with nickel sulphate still at a discount to refined nickel.

Nickel Sulphate: On March 20th, the SMM battery-grade nickel sulphate index price was 27,867 yuan/mt, with the quotation range for battery-grade nickel sulphate at 27,800-28,400 yuan/mt, unchanged from the previous day. In terms of costs, this week, some traders raised the pricing coefficient for cobalt in MHP by about 5 points. The MHP coefficient remains at a high level, and there is insufficient downward pressure on raw material coefficients for the entire Q2. Yesterday, LME nickel prices decreased, slightly weakening cost support for nickel salt smelters. However, the sentiment to stand firm on quotes persists, and has not yet been transmitted to the nickel salt market. In terms of demand, influenced by fluctuations in the cobalt market, the procurement pace of precursor manufacturers has slowed, but some still have just-in-time procurement needs. From a supply perspective, with raw material prices fluctuating at high levels, the sentiment to stand firm on quotes among nickel salt smelters is spreading. Inventory levels at nickel salt smelters remain low, and the market circulation of nickel salts is tightening. Overall, considering the existing demand, low inventory levels, and the sentiment to stand firm on quotes, it is expected that nickel salt prices will have further room for increases in the short term.

NPI: On March 20th, the SMM 8-12% high-grade NPI average price was 1,019 yuan/mtu (ex-factory, tax included), up 1.5 yuan/mtu from the previous working day. In terms of supply, domestically, as the rainy season in the Philippines nears its end, the release of nickel ore volumes still requires time, and nickel ore prices are stable, with weak production incentives, resulting in low production. In Indonesia, recent abundant rainfall and tight nickel ore supply have led to low nickel ore inventories at smelters, and with new capacity releases, production only maintained a slight increase. In terms of demand, stainless steel futures orders were relatively ideal, and with scrap stainless steel prices rising along with finished product prices, the economic advantage of scrap stainless steel weakened, leading to improved procurement sentiment for high-grade NPI among stainless steel mills, with active market inquiries. In the short term, the cost support for high-grade NPI has strengthened, and with tightening supply and demand, prices are expected to maintain a relatively stable trend with a strong upward bias.

Stainless Steel: According to SMM research, on March 20th, the overall stainless steel market price was stable, but quotations showed a downward trend, with extremely sluggish transactions. The most-traded contract 2505 fluctuated downward, and prices fell as delivery to the warehouse proceeded. At 10:30 AM, the SS2505 quote was 13,410 yuan/mt, down 40 yuan/mt. In Wuxi, the spot premiums and discounts for 304/2B stainless steel were in the range of 110-330 yuan/mt. In the spot market, different types of stainless steel showed varying price performances. Specifically, 201/2B coil prices saw a significant decline. The average price in Wuxi dropped to 7,760 yuan/mt, down 50 yuan/mt from the previous day; the situation in Foshan was similar, with the average price also at 7,760 yuan/mt, down 50 yuan/mt. For 304/2B coil, the average price in Wuxi remained at 13,460 yuan/mt, while in Foshan, it continued to be 13,350 yuan/mt, both unchanged from the previous day. The 316L/2B coil prices were relatively stable, with the average prices in Wuxi and Foshan at 24,125 yuan/mt and 24,175 yuan/mt, respectively, with no price changes. The 430/2B coil prices were also stable, with the average prices in Wuxi and Foshan at 7,440 yuan/mt and 7,330 yuan/mt, respectively, both unchanged. In the current context of declining prices, downstream market sentiment has become increasingly cautious. Many buyers, concerned about further price drops, chose to hold cash and wait, leading to very few transactions, which to some extent suppressed the activity in the stainless steel market, creating a stalemate.

Nickel Ore: Last week, in the Philippine low-nickel, high-iron market, prices were generally stable, with weak overall demand from domestic factories. Under losses, the acceptance of price increases was limited. For low-grade nickel ore, there were few transactions this week, and prices remained stable. For medium- and high-grade nickel ore, affected by the rise in Indonesian ore prices, Philippine mines still had a sentiment to stand firm on quotes, with higher mine offer prices. Supply: The southern main mining areas are nearing the end of the rainy season, but the impact still exists. Looking ahead, Philippine shipments are expected to increase. Demand: The continuous rise in NPI prices has boosted nickel ore prices, and with smelters' medium- and high-grade nickel ore inventories at low levels, there is a strong restocking demand. Ocean freight rates currently show some at $11/mt, and with the end of the rainy season in the southern main mining areas, the shift in shipping locations may lead to higher ocean freight rates. In summary, under strong supply and demand, SMM expects that subsequent Philippine prices may fluctuate upward. Current market transaction prices: For pyrometallurgy, the March mainstream premium for Indonesian nickel ore in the K island was 19-21 US dollars/wmt. The SMM Indonesia's local laterite nickel ore 1.2% (delivery-to-factory price) price range was 25.5-27.5 US dollars/wmt; the SMM Indonesia's local laterite nickel ore 1.6% (delivery-to-factory price) price range was 46.5-51.5 US dollars/wmt. For the first half of March, the HPM for 1.2% grade nickel ore was 15.49 US dollars/wmt, and for 1.6% grade nickel ore, the HPM was 27.01 US dollars/wmt. The second half HPM will be announced around March 15th. In terms of supply and demand, the structure did not change significantly compared to last week. With the gradual end of the rainy season, supply expectations remain positive. Smelters continue to make just-in-time procurement, and shipping activity has been warming up. Inventory levels at downstream smelters are low, and procurement demand still exists. Although supply is expected to increase, SMM expects that, with strong supply and demand, price support will persist. Policy-wise: Following the change in the HPM price logic formula and foreign exchange control policies, the nickel ore royalty, currently under discussion, is strongly expected to be implemented within the year. If implemented, it will significantly increase mine costs, and the strong bargaining power of sellers in the nickel ore market may pass on these increased costs to downstream, leading to higher nickel ore prices.