Costs stand firm on quotes, demand picks up, nickel salt prices expected to rise mildly in the short term [SMM Nickel Morning Meeting Summary]

5.12 Nickel Morning Meeting Summary

Macro News:

In terms of macro, domestic policies were favorable: The PBOC implemented a "dual easing" policy (0.5% RRR cut and 0.1% interest rate cut), releasing approximately RMB 1 trillion in long-term liquidity, boosting market risk appetite. However, overseas disruptions continued to intensify: The US Fed maintained interest rates unchanged (4.25%-4.5%), emphasizing rising inflation and unemployment risks. Coupled with the fluctuations in Trump's tariff policies, overseas uncertainties remained high. In terms of supply, the operating rates of leading smelters remained high in May, with stable production rhythms. However, due to factors such as raw material shortages at some smelters, overall refined nickel production was expected to decline. On the demand side, downstream alloy plants' demand for refined nickel remained sluggish after the holiday, with spot transactions at a low level.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price was RMB 123,350-126,300/mt, with an average price of RMB 124,820/mt, a decrease of RMB 75/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan No. 1 nickel was RMB 2,200-2,400/mt, with an average premium of RMB 2,300/mt, an increase of RMB 50/mt from the previous trading day. The premiums and discounts quotation range for Russian nickel was RMB 0-300/mt, with an average premium of RMB 150/mt, unchanged from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2506) surged to a high of RMB 124,000/mt in the morning session before weakening. By the 11:30 close, it settled at RMB 123,420/mt, up approximately 0.2% from the previous trading day's settlement price.

Currently, bullish and bearish factors are intertwined in the nickel market, with nickel prices fluctuating rangebound. The upside pressure comes from weak downstream demand, high inventory pressure, and macroeconomic uncertainties. The downside support relies on the cost line, while the shortage of refined nickel raw materials will affect supply in the short term.

Nickel Sulphate:

As of last week, the SMM battery-grade nickel sulphate index price was RMB 27,858/mt, with a quotation range of RMB 27,860-28,370/mt for battery-grade nickel sulphate, and the average price increased slightly WoW. From the supply side, the supply of MHP and high-grade nickel matte tightened, causing their coefficients to continue fluctuating at highs. Nickel salt smelters, supported by strong cost factors, maintained a firm stance on nickel salt prices. On the demand side, precursor plants had already procured relatively sufficient inventory by the end of April, resulting in sluggish procurement sentiment this week. However, precursor plants still have restocking needs this month, and the market circulation of nickel sulphate produced from low-cost recycled materials is limited. Therefore, precursor plants' acceptance of nickel salt prices has improved.Looking ahead, based on fundamental factors such as the solid support of raw material costs and the dependence of downstream demand, it is expected that nickel salt prices will show a mild upward trend in the short term.

Nickel Pig Iron (NPI):

Last week, the average price of SMM 8-12% high-grade NPI was 950.1 yuan/mtu (ex-factory, tax included), down 17.4 yuan/mtu WoW. This week, the price of high-grade NPI continued to show a weak trend. Supply side, domestically, there has been a significant increase in the port arrivals of nickel ore from the Philippines, meeting the raw material inventory needs of smelters. Additionally, with the resumption of production at some maintenance lines, there has been a slight increase in production. In Indonesia, the current premium for Indonesian nickel ore remains relatively stable, providing strong cost support for smelters. However, amidst consecutive declines in finished product prices and expanding losses at smelters, some production lines have adjusted their operating loads, with an overall expectation of a decline in production. Demand side, mainstream stainless steel mills have relatively sufficient raw material stocking. With stainless steel prices in a period of losses, mainstream steel mills have low purchase willingness for raw materials, and purchase prices are weak. It is expected that high-grade NPI prices will remain under pressure in the short term.

Stainless Steel:

Last week, stainless steel prices rose slightly. Influenced by domestic interest rate cuts, RRR cuts, and expectations of Sino-US negotiations, market confidence has somewhat recovered, with spot prices rising slightly and some enterprises attempting to raise prices. After the Labour Day holiday, a brief period of concentrated restocking brought a small peak in transactions. However, as the effects of policies remained unclear, downstream purchases returned to a cautious wait-and-see attitude, and market activity rapidly cooled. Meanwhile, the operating rate of stainless steel mills remained high, and the prices of raw materials such as nickel and chromium continued to weaken. Despite stainless steel prices already being at a low level, there is still a lack of effective upward momentum.

Currently, the supply side of the stainless steel market continues to fluctuate at highs. Facing the pressure of losses, producers have reduced the production of heavily loss-making 300-series stainless steel and increased the production of 200-series and 400-series products to optimize the steel grade structure. However, influenced by recent policy changes, market uncertainty has significantly increased. Downstream enterprises generally maintain a cautious attitude, with increasingly conservative purchasing behavior and persistently weak consumer demand. This situation of supply-demand imbalance has become the main constraint on the current development of the stainless steel market.

Nickel Ore:

Philippine nickel ore: Last week, Philippine nickel ore prices held steady with slight declines, due to some relaxation in the offer prices from Philippine mines. The CIF price of NI1.3% laterite nickel ore from the Philippines to China was $43.5-45/wmt, down $0.25/wmt, and the FOB price was $32-35/wmt, down $1.5/wmt. The CIF price of NI1.5% was $59-60/wmt, down $1/wmt, and the FOB price was $47-50/wmt, down $2.5/wmt.From the perspective of supply and demand, in terms of supply, although there was precipitation at major nickel ore loading points in the Philippines, affecting nickel ore transportation, with the main mining areas in the south entering the dry season, the supply of nickel ore in the Philippines is still expected to increase. In terms of demand, as the tender prices of downstream NPI hit new lows and the inversion deepened, the sentiment of domestic NPI smelters towards raw material procurement was dampened, and the support for nickel ore prices from the demand side weakened. Regarding ocean freight rates, they remained stable overall during the week, with the rate from the Surigao region to Lianyungang, China, being approximately $10-11/wmt. In terms of exports from the Philippines to Indonesia, the export volume from the Philippines to Indonesia continued to increase. The prices of Indonesian nickel ore remained generally strong during the month, and there was an increase in external purchases of Philippine ore by Indonesia, providing some support for the prices of Philippine nickel ore. Overall, the domestic transaction prices of Philippine nickel ore may be dragged down by the downstream sector and operate under pressure.

Regarding Indonesia's local laterite nickel ore: Prices of Indonesian ore increased slightly this week. For ore used for pyrometallurgy, the mainstream premium for Indonesia's local ore in May fell within the range of $26-30/wmt. The delivery-to-factory price of 1.6% Indonesian ore (SMM) was $52.6-56.6/wmt, up $1/wmt or 1.87% from the previous week. For ore used for hydrometallurgy, market prices fell. The delivery-to-factory price of 1.3% Indonesian ore (SMM) was $23-25/wmt, a decrease of $2 or 7.69%. For ore used for pyrometallurgy: On the supply side, the rainy season lasted longer this year. Although precipitation in Sulawesi has improved, it still continues. Meanwhile, Halmahera also entered the rainy season in May. Frequent precipitation has affected the shipments from mines. Additionally, after the implementation of the PNBP policy, the sales costs of nickel ore have increased, leading to a strong sentiment among mines to stand firm on quotes. On the demand side, despite the continuous decline in NPI prices, the nickel ore inventories of downstream smelters remain relatively low, and there is still demand for just-in-time procurement. Coupled with market concerns about the approval of subsequent supplementary quotas for RKAB, the sentiment towards nickel ore procurement remains high. After the price increase, downstream NPI enterprises are facing difficulties. For ore used for hydrometallurgy, affected by the reduction in MHP production schedules in Indonesia in April, downstream smelters attempted to push down the prices of ore used for hydrometallurgy. After the Labour Day holiday, the market transaction prices of ore used for hydrometallurgy fell, while MHP profits remained favorable. SMM expects that with the gradual resumption of production of MHP projects in the MOROWALI Industrial Park in May and the construction of new hydrometallurgy projects in H2, the prices of ore used for hydrometallurgy may rebound.