SHANGHAI, May 14 (SMM) – SMM takes a bearish outlook on nickel prices in May and June as optimism from nickel sulphate for the battery industry weakened. Whether pressure will emerge from the nickel pig iron (NPI) side in the stainless steel industry remains to be seen.

The price gap between China's battery-grade nickel sulphate in nickel content and nickel cathode will continue to narrow in May. The gap was once narrowed to 15,000 yuan/mt in early May as nickel sulphate prices declined due to fewer purchases from ternary precursor plants. The lower profits of ternary precursor plants than that of nickel sulphate producers also accounted for the drop in nickel sulphate prices.

NPI supply has exceeded 40,000 mt in metal content in April and it is likely to stay above this level in the next few months. However, output of stainless steel, especially series 300, is expected to decline on high inventory.

Whether the price uptick of series 300 stainless steel earlier this month is sustainable remains to be seen. The average price rose from 14,800 yuan/mt on May 2 to 15,000 yuan/mt on May 10, SMM data showed. 

If the price reversed its upward trend, we would expect nickel prices to fall and test the $13,000/mt level in the short term. Otherwise, it is likely to hover at $13,500-14,000/mt.

The inventory/output ratio of series 300 stainless steel stood at 25% in late April, indicating a relatively high stock pressure. Some mills plan to reduce the output of series 300 this month as losses continued to build up. 

Nickel prices showed more correlations with the prices of battery instead of that of stainless steel from the beginning of 2018.

This is an excerpt of the China Nickel Monthly to be published this week.

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