High-Grade NPI Market Relatively Stable With Strong Trend Nickel Ore Prices May Rise [SMM Nickel Morning Meeting Summary]

3.24 Nickel Morning Meeting Summary

Refined Nickel: Last week, nickel prices fluctuated downward, with SHFE nickel main contract prices ranging from 128,000 to 134,000 yuan/mt. On the macro front, the Indonesian government plans to raise the nickel ore tax rate to 14%-19%, and the tax rates for intermediate products such as nickel pig iron (NPI) and nickel matte will also be increased. The market generally expects that the implementation of this policy will increase the costs of nickel ore and NPI, providing some support to nickel prices in the short term. Fundamentally, the rainy season in the Philippines is nearing its end, and nickel ore shipments are expected to increase, but current supply remains tight. Prices for medium- to high-grade nickel ore have softened slightly, while Indonesian nickel ore prices remain stable and relatively strong. The tight domestic nickel ore supply has led to weaker production incentives for smelters, while NPI production in Indonesia remains stable. In terms of downstream demand, the overall performance of the stainless steel sector was weak. After the Chinese New Year, some steel mills resumed production, but overall supply remained limited, and the market recovery was slow. Downstream operating rates and order volumes were generally weak, leading to inventory buildup. It is expected that SHFE nickel prices will continue to be influenced by Indonesian tax policies next week, maintaining a relatively stable trend with a strong bias.

Nickel Sulphate: Last week, the SMM battery-grade nickel sulphate index price was 27,888 yuan/mt, with the quotation range for battery-grade nickel sulphate at 27,820-28,420 yuan/mt, and the average price increased compared to the previous week. On the supply side, although LME nickel prices pulled back, the extent of immediate cost losses for nickel salt smelters eased, and inventories remained at low levels. With limited market circulation of nickel salts, nickel salt smelters showed no signs of compromising on prices. On the demand side, as the cost losses for precursor manufacturers intensified, the procurement pace slowed, and transactions were relatively quiet this week. However, some precursor manufacturers still had just-in-time procurement needs. Considering the existing market demand, low inventory levels, and the sentiment to stand firm on quotes among nickel salt smelters, it is expected that nickel salt prices may further rise in the short term.

Nickel Pig Iron: Last week, the SMM 8-12% high-grade NPI average price and the Indonesian NPI FOB index both increased. The high-grade NPI market maintained a relatively stable trend with a strong bias, and prices continued to rise slightly. On the supply side, domestically, as the rainy season in the Philippines nears its end, it will take time for nickel ore supply to increase, and nickel ore prices remain stable. Smelter production incentives are weak, and output is running at low levels. In Indonesia, recent abundant rainfall, coupled with tight nickel ore supply, has kept smelter nickel ore inventories at low levels. With the release of new capacity, production only saw a slight increase. In the stainless steel spot market, stainless steel futures orders were relatively ideal, and scrap stainless steel prices followed the upward trend of finished product prices, weakening the economic advantage of scrap stainless steel. Steel mills' interest in purchasing high-grade NPI has warmed up, and market inquiries have become more active. In summary, in the short term, high-grade NPI is strongly supported by costs, and with tightening supply and demand, prices are expected to maintain a relatively stable trend with a strong bias.

Stainless Steel: Last week, the overall stainless steel market prices remained stable. Due to safety inspections at a major plant, market supply decreased, pushing up the prices of 200-series and 400-series products. In contrast, 300-series product prices remained stable. As the weekend approached, market sentiment became more cautious, and overall transactions were moderate. The most-traded SS2505 futures contract fluctuated downward, with prices declining as delivery actions took place. At 10:30 AM, the SS2505 quote was 13,415 yuan/mt, up 5 yuan/mt. In Wuxi, the spot premiums and discounts for 304/2B stainless steel ranged from 105 to 325 yuan/mt.

Nickel Ore: Last week, the prices of low- and high-grade nickel ore from the Philippines remained stable, while the prices of medium- to high-grade Philippine ore saw a slight increase. The main reasons were two-fold: 1. The rising and expected further increases in Indonesian nickel ore prices, which provided some support to Philippine nickel ore export prices; 2. From a supply and demand perspective, the Surigao region began reporting and shipping ore, but the supply recovery was slow due to weather conditions. On the demand side, most domestic NPI plants still had low inventories, and the need for just-in-time procurement of raw materials was strong. Although the rise in high-grade NPI prices brought some profit recovery, domestic iron plants were still incurring losses, limiting their ability to accept high-priced nickel ore. Ocean freight rates rose again during the week due to changes in shipping locations and poor weather, further increasing the import costs of nickel ore. Overall, under the influence of a strong supply and weak demand pattern, along with policy disruptions, Philippine ore prices increased. SMM expects that Philippine ore prices may remain stable with a strong bias in the future. Last week's market transaction prices: For pyrometallurgy ore, the SMM Indonesia local ore 1.6% weekly price was $49.5/wmt, and for hydrometallurgy ore, the SMM Indonesia local ore 1.2% grade weekly price was $26.5/wmt. The mainstream premiums for pyrometallurgy Indonesian nickel ore in March held steady at $19-21/wmt, with CIF prices rising slightly, mainly due to the Indonesian Ministry of Energy and Mineral Resources' benchmark price for local ore in the second half of March, which increased slightly from the previous period, with 1.2% grade ore rising $0.26 and 1.6% grade ore rising $0.46. From a supply perspective, the extended rainy season in Sulawesi this year has affected the mining and transportation of nickel ore, and the supply recovery in major mining areas like Sulawesi has been slow. Additionally, the Eid al-Fitr holiday at the end of March has exacerbated the supply tightness. On the demand side, Indonesian NPI smelters generally have low inventories and still have just-in-time restocking needs, with high downstream procurement sentiment. SMM expects that the supply of nickel ore may continue to be tight. Policy-wise, last week, the Indonesian Ministry of Energy and Mineral Resources signaled that the PNBP policy might be implemented before Eid al-Fitr. If the policy is implemented as scheduled, the sales costs for nickel ore mines will increase, and given the continuous rise in NPI and MHP prices, the bargaining power of mines is currently strong. The additional costs from the policy may be largely passed on to downstream enterprises, providing strong support to nickel ore prices. In summary, SMM expects that the price of Indonesia's local nickel ore may continue to rise.