Overnight SHFE Nickel Corrected and Is Returning to the Fundamentals

SHANGHAI, Mar 29 (SMM) - Overnight SHFE nickel corrected again with longs reducing their positions. The contract kept dropping, and is gradually returning to the fundamentals. On the supply side, affected by the pandemic, spot transactions and transport are both delayed. Under the background of the deteriorating pandemic and high uncertainties haunting the market, the overall spot market transaction has been weak.

On the NPI side, the high cost of nickel ore and smelting offered enhanced support to NPI prices. And the large difference between the acceptable prices of the upstream and downstream led to poor transactions in the market. On the demand side, the cost efficiency of self-dissolution of nickel briquette is still relatively poor, and there is still possibility of nickel sulphate production cuts in April. Hence the purchase willingness is not strong.

For stainless steel, the current stainless steel manufacturers’ operating rates have been less than expected, coupled with weak market transactions. To sum up, the current pure nickel market maintains weakness in both supply and demand.

Pure nickel: As the recent futures prices have significantly deviated from the spot supply and demand, SMM has suspended offering premium/discount for 1# Jinchuan nickel, 1# imported nickel and nickel briquette, while SMM prices of 1# refined nickel, 1# Jinchuan nickel and 1# imported nickel are available as usual through actual research.

Jinchuan and NORNICKEL nickel were quoted flat yesterday at 227,250 yuan/mt, down 34,500 yuan/mt from last Friday. Nickel briquette was quoted at 224,750 yuan/mt yesterday, down 35,250 yuan/mt from last Friday. The prices fell mainly due to the pullback of futures prices.

NPI: A of March 28, SMM high-grade NPI average price stood at 1635 yuan/mtu (ex-factory, tax included), flat from a day ago. The intraday market still heard no transaction, and NPI prices remained firm. The acceptable prices of upstream and downstream differed greatly, hence it was difficult to reach a deal. Nickel ore prices and NPI smelting costs were both high, sustaining NPI prices at a high level.

On the demand side, downstream stainless steel sector’s operating rates were less than expected, and the transaction was thin. And steel mill could not accept high-priced raw materials due to meagre profits. At the same time, the recent domestic pandemic has quickly pulled up the freight cost and restricted the transport in places like Hebei Inner Mongolia, bringing further difficulties to NPI supply. Nonetheless, there is still restocking demand across steel mills in April, and strong demand will underpin NPI prices. And the market shall closely watch the moves of nickel prices.

Stainless steel: Nickel prices and SS contract are both falling. The SS2205 contract was moving around the 10-day moving average. Stainless steel spot prices dropped, and spot prices in Wuxi stabilised yesterday. 304 cold-rolled coil was reported at 20,700-21,200 yuan/mt, and 304 hot-rolled coil at 20,000-20,200 yuan/mt. In afternoon trade, some institutions quoted cold-rolled coil at 20,200 yuan/mt (base prices) shipments, while hot-rolled coil prices dropped below 20,000 yuan/mt to 19900 yuan/mt. The overall market turnover was weak.

The most-traded stainless steel contract shifted to SS2205 contract, but the futures contract saw great corrections. Futures were again in discount over the spot. SHFE SS2205 contract (10:30 am, Beijing time) stood at 20,115 yuan/mt, and the stainless steel spot in Wuxi was in premiums of 755-955 yuan/mt. (Spot deburred edge = burr edge + 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.]