SMM Minutes: LME Price Spread Widened Again, Driving SHFE Nickel up Overnight

SHANGHAI, Mar 24(SMM) - SHFE nickel hit limit up overnight, up as much as 17%. Nickel prices moved in a strong momentum. On the supply side, with intensified pandemic, transport was restricted in Shanghai. The premiums of pure nickel dropped yesterday, but the absolute price was high because of the upward trend. The spot transactions were light with weak supply and demand. In terms of NPI, the smelting costs, price spread and fundamental of the iron plants supported the prices of ferronickel, and the market was in short supply due to the procurement of steel mills, driving up the ferronickel prices. On the demand side, the nickel prices had not settled yet by the impact of capitals. Upstream and downstream of nickel sulphate made cautious inquiries. The market may trade flat in the short term until the nickel prices settled. In terms of stainless steel, the market transactions were based on slight rigid demand with overall light trading. The opening of LME nickel up as much as 13.67%, followed by SHFE nickel on March 23. The nickel prices were under the impact of capitals. Focus on the movement of LME nickel, which will influence the trend of SHFE nickel.

Pure nickel: On March 23, SHFE 2204 nickel moved rangebound around 209,000 yuan/mt in the morning. According to SMM's research towards upstream and downstream as well as collective inquiries from market traders on March 23, Jinchuan stood at 3,500-3,900 yuan/mt, flat from Mar 21. NORNICKEL nickel stood at 3,000-3,700 yuan/mt, down 250 yuan/mt from March 21. Import losses had gradually turned into profits recently. It still needs some time for arrivals from customs clearance to the market, leading to the tense supply of the market in the short term. The main reason for the decline in intraday premiums was that the market prices rose compared to yesterday, coupled with traders cutting premiums for fast shipping at the end of the month. In terms of nickel briquette, the spot market quoted at 8000-8,000 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.

Nickel sulphate: LME stopped falling on Tuesday March 22, but prices had not yet stabilised under the influence of capitals, and the upstream and downstream took caution in inquiries on nickel sulphate prices before the risks of raw materials subsided. During the day on Wednesday March 23, the activity of market inquiries and quotations improved significantly compared to last week, but transactions were hard to make due to the large difference between both intended prices. According to feedback from upstream and downstream, market quotations ranged from 46,000-49,000 yuan/mt today. However, the accepted prices of downstream were still below 45,000 yuan/mt, which was in a stalemate. The market may trade flat in the short term until the nickel prices settled.

NPI: As of March 23, SMM average price of high-grade NPI was 1,615 yuan/mtu (ex-factory, tax included), down 5 yuan/mtu from the previous trading day. Mainstream steel mills made transactions during the day. A stainless steel plant in East China concluded a transaction on over 10,000 mt ferronickel at 1,630 yuan/mtu (tax included, delivery to factory) with traders’ supply. After a month of waiting, finally there were steel mills stocking with satisfying procurement. The transaction prices were slightly below market expectations which mainly because of the impact of market reservoir, the result of the bargain. The smelting costs, price spread and fundamental of the iron plants supported the prices of ferronickel, and the market was in short supply due to the procurement of steel mills, driving up the ferronickel prices. Steel mills had moved up their accepted prices because of the low inventory driving up the steel prices. It is expected that ferronickel prices are steadily stronger in the short term. 

Stainless steel: On March 23, SS2204 contract rose, up to 20,600 yuan/mt, but the spot market transactions were light with prices unable to follow the upward trend but rather being stable. 304 cold-rolled ranged from 20,300-20,700 yuan/mt, 304 hot-rolled at 19,800-20,000 yuan/mt, 316L cold-rolled at 31,300-31,500 yuan/mt, 316L hot-rolled at 30,300-31,000 yuan/mt. In terms of market transactions, the market transactions were based on slight rigid demand with overall light trading. According to the traders, the current turnover was very poor, less than half of the normal volume. While the futures prices rose, the spot prices were near flat. As of 10:30 am, the SHFE SS 2204 contract stood at 20,465 yuan/mt, and the spot premiums in Wuxi were 5-405 yuan/mt. (Spot prices of deburred edge products = Spot prices of burr edge products + 170 yuan/mt).

Disclaimer:

The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.