Ferronickel prices rose while profit margins of spot ore were still shrinking

SHANGHAI, Mar 3 (SMM) — Since the gradual recovery of the market after the holiday, prices of nickel ore and ferronickel rose significantly. In addition to the rising nickel prices driving the market sentiment, support from the fundamentals was also strong. The general trend of nickel ore prices in 2020 was a continuous upward trend. The short supply of nickel ore was also clearly reflected in the prices of ore. CIF prices of Philippine 1.5% laterite nickel ore were exploded by the news of the ban on mining in August 2019. In just a few days, it stimulated the prices of ore to rise from $30 to $42/wmt, but the unfulfilled shortage made the price increase much lower than the increase caused by the current substantial shortage. SMM 1.5% CIF quoted at $80/wmt as of February 26, up $11/wmt or 13.8% from the last trading day before the holiday. Mines were reluctant to sell at high prices. Domestic port inventory fell to a low level in the past three years. Combined with soaring ocean freight, nickel ore prices may still continue to rise. Nickel ore prices may remain high until the large shipments after the rainy season in the Philippines is over. it is expected that the turning point of the price decline will be at least until the beginning of May after the iron factories restocked a certain amount of goods. If ferronickel plants continued to maintain a certain profit margin, the time point of price decline may continue to be delayed.

For downstream iron plants, the soaring ore prices corresponded to the prices of ferronickel, which had a significantly lower increase. However, the prices of ferronickel had a significant upward trend due to its rising ore prices and the rising marginal costs. The rise in the prices of downstream stainless steel and ferronickel alternative raw materials scrap also supported the rise of ferronickel prices to a certain extent. The average prices of SMM high-nickel pig iron stood at 1,190 yuan/nickel point (ex-factory including tax) as of February 26, up 70 yuan/nickel point or 5.9% from the last trading day before the holiday. As the steel plant’s stockpiling was gradually satisfied, the market transaction may gradually turn to be flat next week, the prices may maintain this position in the near term, and the possibility of continuing to rise sharply was low.

The price increase of raw nickel ore is significantly higher than the price increase of ferronickel. From the cash profits of iron plants in various regions and the profit of nickel ore 25 days ago, the current nickel ore profit is still on a downward trend despite the significant increase in the prices of ferronickel. However, the profit of inventory ore improved significantly. The above analysis can conclude that the prices of nickel ore will continue to rise in the near future, and the prices of ferronickel may continue to fluctuate at high. Under the squeeze of raw material prices, the profit of ferronickel plants may continue to shrink. In addition, due to the raw material inventory, some small manufacturers may continue to reduce production. Relatively speaking, large manufacturers have obvious advantages and still have more profit margins, and the raw material inventory is relatively sufficient. The reduction of production by small manufacturers will not cause the production of ferronickel to drop significantly.