SMM nickel market morning comment fully (Apr 1)

Nickel prices are affected by cost-related news, fluctuating around 130,000 yuan/mt. Before last Thursday's U.S. stock market opening, the latest report from the U.S. Bureau of Economic Analysis increased the GDP growth rate for the fourth quarter of 2023 and lowered key inflation indicators. However, Federal Reserve Board Governor Waller, on last Wednesday, suggested no urgency for rate cuts, signaling a potential delay in rate cuts. U.S. dollar index futures rose. Fundamentally, the pure nickel spot market stayed strong. Downstream buyers utilized their stockpiled materials because of high nickel prices. SMM predicted these inventories would be depleted by late March. With nickel prices dropping, buyers are eager, and this trend is likely to continue until early April. Supply side, overseas nickel plate long-term orders arrived for the first time this year, and local nickel plants are ramping up production. However, the price gap between nickel sulphate and nickel briquettes widened, reaching around 10,000 yuan/mt. This has made producing nickel sulphate profitable by dissolving nickel briquettes with sulfuric acid. With a shortage of intermediate products like MHP, some nickel sulphate plants started buying nickel briquettes. Due to limited domestic nickel briquettes stock and the ongoing closure of pure nickel import window, it's hard for overseas nickel briquettes to enter the domestic market. Currently, the domestic supply and demand for nickel briquettes are extremely tight. However, as overseas intermediate products arrive, the demand for nickel briquettes will decrease.

Nickel: Last week, the overall nickel price continued its downward trend compared to the previous week, but rebounded slightly to 130,920 yuan/mt on Thursday. Recent nickel price logic in the main return to the fundamentals, but still affected by the cost side of the news, fluctuations run above and below 130,000 yuan/mt. Macro view, Thursday (March 28) before the U.S. stock market, the U.S. Bureau of Economic Analysis released the latest report upwardly revised the U.S. gross domestic product (GDP) growth in the fourth quarter of 2023, at the same time, the report's key inflation indicators have also been revised downward. However, on Wednesday last week, Federal Reserve Board Governor Waller stated that there was no need to rush to cut interest rates. He emphasized that recent US economic data suggest that rate cuts should be postponed or the number of rate cuts this year should be reduced. Waller used the phrase "no need to rush to action" four times in his speech, including the title of the speech that day. Futures on the US dollar index continued to rise, which may also reflect expectations of delayed interest rate cuts this year. From a fundamental perspective, the spot market performance of pure nickel remained strong last week. This was mainly because, with nickel prices remaining high, downstream buyers were forced to postpone purchasing and instead consume raw material inventories in their factories. It was previously estimated by SMM that this round of inventory cycle would be consumed by the end of March. Coupled with the impact of the downward trend in nickel prices that started two weeks ago, downstream buying sentiment has risen, and this round of purchasing is expected to continue until early April. From the supply side, on this week ushered in 24 years the first batch of overseas nickel plate long order arrivals, the domestic nickel plant production is still maintained in the climbing stage, a comprehensive view of the domestic Nickel supply week is still maintaining the increment. However, on the other hand, as the price difference between nickel sulfate and nickel beans widens, eventually approaching around 10,000 yuan/mt, nickel bean-to-sulfate nickel conversion becomes profitable. Against the backdrop of tight supply of intermediate products such as MHP in the domestic market, some new energy-related companies have begun to purchase nickel beans in the market. Also, with limited domestic nickel bean inventories and the continuous closure of the import window for pure nickel, the difficulty of importing overseas nickel beans into China is relatively high. Therefore, at present, the supply and demand for domestic nickel beans are in an extremely tight state. However, with the release and arrival of overseas intermediate products in the future, demand for nickel beans will decline.

Nickel Sulfate: On March 29, the SMM battery-grade nickel sulfate index price was 30,650 yuan/mt, down 61 yuan/mt from the Friday of the week before last, and the price of battery-grade nickel sulfate was 30,500-31,000 yuan/mt, with the average price remaining unchanged from the Friday of the week before last. Last week, the nickel sulfate market saw upstream and downstream negotiations open, and prices remained stable. Last week, downstream ternary precursor companies gradually completed the purchase of nickel sulfate for April. Transaction and inquiry activities weakened. From the supply side, salt plants have optimistic operating rates as expected, and finished product inventories are low. It is expected that the wet method recovery plant's nickel line operating rate will be around 60% in March, with a small increase in output. Overall supply is expected to remain flat or slightly exceed expectations, but overall production is lower than the peak in January. In terms of demand, ternary precursor companies have recently concentrated their nickel salt purchases on materials needed for mid to late April, and have taken a relatively cautious attitude towards materials needed for late April. In the short term, the tight supply-demand situation has not yet reversed, but it is expected to ease compared to before. In terms of raw materials, nickel prices have recently fallen significantly, and the prices of MHP and nickel matte coefficient has remained stable, resulting in a slight decrease in overall costs. Profitability across the entire raw material line is optimistic. Cost support is weakening. It is expected that in the short term, the price of nickel sulfate will remain stable due to the upstream-downstream negotiations. However, it is expected that as upstream and downstream negotiations begin to discuss orders for late April, there is a possibility that the price of nickel sulfate will follow the nickel price downward. However, due to the current overall tight supply-demand situation in April, the narrowing of salt plant profits is limited.

NPI: Last week, the average price of SMM 8-12% NPI was 934.7 yuan/mtu(including tax), a decrease of 12.7 yuan/mtu from the week before last. Last week, nickel iron prices showed a downward trend. From the supply side, although the approval speed of nickel ore quotas has recently increased significantly, it still takes time from the mine to the smelter, so it is expected that NPI production during March will still be at a low level. From the demand side, the weak demand in the stainless steel terminal continues to cause a continuous decline in the spot prices of stainless steel. Against this background, the transaction prices of NPI continued to decline last week. Overall, the weak demand in the stainless steel terminal continues to cause a cumulative trend in the supply side, and the current nickel iron prices are weak.

Stainless Steel: Last week, the spot price of stainless steel stabilized after hitting a low. On March 29th, the SMM 304 cold-rolled raw edge price was reported at 13,400-13,700 yuan/mt, and the SS contract main force rebounded after a downturn, with the lowest price hitting 13,280 yuan/mt. In terms of news, last week, the weekly price of South China steel mills continued to decline compared to the previous period. On Wednesday last week, South China steel mills adjusted their sales policies again, with a basic price of 13,300 yuan/mt for 304 cold-rolled coils and 13,000 yuan/mt for 304 hot-rolled coils and sheets. Actual transactions can fluctuate by 100 yuan/mt based on the quotation. Last week, under the pressure of digesting the agency agreement volume at the end of the month and the continuous decline in stainless steel market prices, demand that had been waiting at high prices since the beginning of the month was released last week. The spot price of stainless steel was at a low level last week, and some traders also entered the market last week. In terms of social inventories, the delivery volume in Xifo was relatively small last week. In addition, since mid-March, steel mills have adjusted the distribution volume, and currently, public warehouses and port inventories have been gradually transferred to agency and trading company warehouses. Last week, social inventories decreased for the first time since the beginning of the year, with a decrease of 2.27% compared to the previous month. It is expected that the spot price of stainless steel will continue to fluctuate at a low level this week, and social inventories may continue to decrease.