Overnight SHFE Nickel Corrected after Hitting Limit Up, Spot Market Challenged

SHANGHAI, Mar 25 (SMM) - Nickel futures staged a dramatic scene again yesterday. The contract immediately corrected after hitting limit up. The abnormal fluctuation of nickel prices under the money game has not yet subsided. The wildly fluctuating nickel prices have brought great trouble to the spot market. At present, under the current nickel market landscape, the spot market trading in all nickel-related sectors are basically stagnant, according to SMM research.

Unreasonable fluctuations in nickel prices mainly affect the following two aspects: 1. Raw materials prices, that are settled based on futures prices, especially LME nickel, have seen forced up. And the downstream refuses to purchase under small orders when import losses are obvious, and the long-term orders are also mostly under negotiation. 

2 The market sentiment has been on edge for lack of clear guidance. The upstream and downstream are cautious in making quotations and shipments, and are mainly in a wait-and-see state. However, as the end of the month is approaching, some companies still have procurement demand. With such fluctuations in nickel prices, the procurement cycle is forced to be delayed, and companies may face challenges in production and order delivery. Entities are currently in a dilemma and surviving. SMM also hopes that nickel prices stabilise as soon as possible and return to the fundamentals. Meanwhile, we call on everyone to stay rational and be cautious about speculation. 

Pure nickel: As of March 24, driven by LME nickel a day ago, the prices of SFHE nickel hit limit up and rose to 245,740 yuan/mt. Intraday traders made no quotations and were not interest in making shipments due to hedging, so Jinchuan and NORNICKE nickel were flat over futures prices at 245,740 yuan/mt. In terms of nickel briquette, due to the current high SHFE nickel prices, some nickel sulphate manufacturers stopped their nickel briquette dissolution lines, hence some briquette stocks were sold at 244,740 yuan/mt. In addition, nickel briquette traders also made no quotations and were barely willing to ship due to unstable market conditions and hedging reasons. Affected by the money game entering LME nickel, both LME and SHFE nickel posted extreme moves, and so far there was almost no transaction in the market.

NPI: As of march 24, SMM average price of high-grade NPI was 1630 yuan/mtu (ex-factory, tax included), up 15 yuan/mtu from a day ago. Market inquires were scarce amid fluctuating nickel prices. At present, the cost of NPI plants is still high, and the prices of auxiliary materials and nickel ore are firm. And coupled with high the transportation cost on the back of spreading pandemic, the prices of NPI could hardly fall. Intraday SHFE and LME nickel both hit limit up, the wide SHFE-LME spread also sustained NPI prices at a high level. In terms of supply and demand, steel mills are less motivated to purchase due to fear of high prices. In order to avoid cost risks, they are still trying to postpone their demand though the in-plant inventory is relatively low and the demand is strong. Due to the limitation of raw materials, the production of NPI is increasingly unable to reverse the widening supply gap. And due to difficulties in port and land transportation on spreading COVID, it is expected that NPI prices will keep rising in the future.

Stainless steel: As of March 24, as SHFE and LME nickel both touched limit up, SS contract also recorded a gain of more than 7%, and SS2204 rose above 22,000 yuan/mt. Although the spot market was sluggish, the market quotations also rose sharply driven by the sharp rise in futures prices. 304 cold-rolled coil prices were reported at 21,300-21,500 yuan/mt, and the average price was raised by 750 yuan/mt. Prices of 304 hot-rolled coil moved between 20,300-207,00 yuan/mt, with the average price up 650 yuan/mt. The prices of 304 stainless steel (deburred edge , 316L cold-rolled and 316L hot-rolled coil were 21,300-21,800 yuan/mt, 31,500-32,000 yuan/mt and 30,600-31,200 yuan/mt respectively. The market transaction volume was very small with poor performance. And high prices also depressed downstream demand. However, as prices fluctuated sharply, market trade and inquiries were active, and there were low-priced sources circulating between markets. After intraday futures prices rose, the spot prices had fallen into discounts with a low of 300 yuan/mt.  As of 10:30 am (Beijing time), the SHFE SS 2204 contract stood at 21475 yuan/mt, and the spot premiums in Wuxi were -305 - 195 yuan/mt. (Spot prices of deburred edge products = Spot prices of burr edge products + 170 yuan/mt)