SMM Minutes: LME Nickel Stablised after Limit Down, SHFE/LME Price Ratio with Gradual Recovery

SHANGHAI, Mar 23(SMM) - On the supply side, because traders used futures to hedge the spot risk, while their short positions were about to change from month to April, which would bring them the cost of changing months. But the market generally had bearish expectations, leading to the light transactions of pure nickel spot. The sources in the market were inadequate due to a longer period without customs clearance and the overall supply was tight. In terms of NPI, although scrap steel had better cost effectiveness and could be a substitute, and the market reservoir had the possibility to release, the prices of ferronickel were supported by the costs, price spread and the fundamental, so the prices would maintain fluctuations in the short term. On the demand side, although the overall demand had fallen, the demand for nickel briquette remained above 200,000 mt, while the procurement expectations for nickel sulfate plants were low. In terms of stainless steel, the impact of the pandemic on transport had been improved this week, and some areas had recovered procurement, but the market held strong bearish expectations of nickel prices, influencing the traders taking goods. On March 22, LME nickel opened with 15% limit up/down, but had not reached limit down, which also indicates that LME nickel gradually returned to the fundamentals after the soaring, while the price ratio recovered. SHFE nickel was determined by the domestic fundamentals. While the import window was about to open but the spots had not yet flowed into the domestic market, SHFE nickel is expected to maintain fluctuations.

Pure nickel: On March 22, SHFE 2204 nickel moved rangebound around 207,800 yuan/mt in the morning. According to SMM's research towards upstream and downstream as well as collective enquiries from market traders on March 22, Jinchuan stood at 3,500-3,900 yuan/mt, up 50 yuan/mt from Mar 21. NORNICKEL nickel stood at 3,500-3,700 yuan/mt, up 550 yuan/mt from Mar 21. Spot transactions were weak during the day. The supply in Shanghai was inadequate due to the pandemic, leading to a weak fundamental. The current imports maintained large losses. Because NIKKELVERK nickel and NORNICKEL nickel were unable to pass customs clearance and flow into the domestic market, leading to the shortage of supply. NIKKELVERK nickel did not have quotations in the market. The rise of premiums today was mainly due to the sharp drop in the current market compared to yesterday. In terms of nickel briquette, the spot market quoted at 6,000-8,000 yuan/mt. Traders began to ship, but the downstream large factory had not enough inventory with low purchasing willingness. Nickel briquette was still in short supply. There were few transactions in the spot market.

NPI: As of march 22, SMM average price of high-grade NPI was 1,620 yuan/mtu (ex-factory, tax included), down 5 yuan/mtu from the previous trading day. There were more inquiries for steel mills during the day. On the supply side, nickel ore prices remained high as auxiliary material prices rose. Iron prices were supported by smelting costs of iron plants. SHFE nickel maintained fluctuations while the mainstream remained stable. The price spread between pure nickel and ferronickel was still large, which could drive the price movement. Steel mills were late to make purchases. The demand growed stronger, while the growth rate of market supply could not catch up the demand, with the existence of gap and higher ferronickel prices. On the demand side, there were inquires for steel mills that the seller quoted at 1,650 yuan/mtu (ex-factory  including tax). Scrap steel had better cost effectiveness and could be a substitute for ferronickel, which may make an impact on iron prices. When the fluctuations of futures nickel were large and the price spread expanded, the market reservoir would enlarge. While the price spread narrowed, the reservoir may affect the market prices. Ferronickel Prices are expected to remain high or in slight adjustment in the short term.

Stainless steel: On March 22, SS2204 contract moved around 20,000 yuan/mt. In Wuxi market, the intraday prices of spot market remained stable. 304 cold-rolled ranged from 20,300-20,700 yuan/mt, 304 hot-rolled from 19,800-20,000 yuan/mt, 316L cold-rolled from 31,300-31,500 yuan/mt, 316L hot-rolled from 30,300-31,000 yuan/mt. In terms of market transactions, transport had improved compared to last week under the impact of the pandemic. Areas with less restrictions had begun to take goods and purchase, but the overall market transactions were still limited. And the market had stronger bearish expectations for nickel prices and held varied opinions towards the stainless steel prices. With unstable prices, the market was also affected in taking goods. As of 10:30 am (Beijing time), the SHFE SS 2204 contract stood at 20,010 yuan/mt, and the spot premiums in Wuxi were 460- 860 yuan/mt. (Spot prices of deburred edge products = Spot prices of burr edge products + 170 yuan/mt).