SHANGHAI, Jan 14 (SMM) - The prices of high-grade NPI dropped sharply in December. The prices stood at 1,445 yuan/mtu in early December, and plummeted to 1,250 yuan/mtu at one point in the middle of the month (tax included, delivery to factory). The market’s transaction sentiment was weak. The NPI prices rallied at end-December. The average SMM price of high-grade NPI was 1,295 yuan/mtu, down 150 yuan/mtu from the beginning of the month.

On the demand side, the orders from the stainless steel sector weakened. The falling stainless steel prices caused losses at the mills, significantly pressuring raw material prices. The acceptable prices of NPI plunged to around 1,250 yuan/mtu (delivery to factory, including tax). The mills would have suffered severe losses if the prices exceeded this level. The sluggish stainless steel market prompted some mills to advance maintenance, and some decided to cut or suspend the production. The demand for NPI thus weakened further, preventing the NPI prices from rebounding. In addition, the falling prices of stainless steel strengthened the cost efficiency of stainless steel scrap compared with high-grade NPI, turning the mills to purchase stainless steel scrap or postpone NPI purchases. All of these factors dragged down the NPI prices. In this scenario, the prices offered by domestic traders as well as the more cost-efficient Indonesia NPI prices dropped along with the broad market.

On the supply side, the NPI plants continued to use high-priced nickel ore inventories restocked ahead of the wet season in the Philippines. And the smelting costs will hardly fall in the short term. The NPI plants thus raised their prices and mostly stood on the sidelines with the exception of a few that sold in small volumes to improve their cash flows. Meanwhile, some NPI plants halted the production or cut their output to lower their risks. Both the supply and demand were weak. At the end of December, the NPI prices gradually rallied on the back of the cost support. The traded prices rose to around 1,290 yuan/mtu (ex-works, tax included) and returned to the breakeven point of NPI plants thanks to the year-end stockpiling by steel mills.

The NPI prices are unlikely to rise significantly in January, with the prices of high-grade NPI expected to move between 1,310-1,360 yuan/mtu (ex-works, including tax). The costs at NPI plants are unlikely to fall, while the high-grade NPI output will stabilise. Stainless steel mills will advance the stockpiling to ensure the production after CNY holidays. The higher stainless steel prices will also bolster its raw material prices. But the high costs at steel mills will prevent the NPI prices from surging.