NPI and refined nickel show mixed performance. Will the discount narrow again?

During the week, the SMM 8-12% NPI weekly average price was 987.1 yuan/mtu (ex-factory, tax included), up 14.3 yuan/mtu from a week ago. The Indonesian NPI FOB index rose 1.46% MoM to $1.7/mtu, with the price increase of NPI expanding this week. Supply side, domestically, current NPI production is running at a low level. A high NPI smelter in north China publicly sought production line leasing cooperation, which may have a limited impact on supply. In Indonesia, the shortage of laterite nickel ore has not been resolved, with inventory at smelters at a low level. The shortage of laterite nickel ore in the Weda Bay area is particularly prominent, and NPI production in July is expected to decline. Additionally, the shortage of laterite nickel ore has led to limited approval of export resource tax tickets, affecting short-term Indonesian NPI exports. Demand side, a stainless steel plant in east China released procurement this week, together with destocking in stainless steel social inventory, keeping spot prices stable. There is no significant reduction in production expected for stainless steel plants. The second-largest private stainless steel plant in China faced bankruptcy restructuring disputes, but according to the SMM survey, the company's production remains normal in the short term. In summary, there is an expectation of reduced NPI supply, while downstream demand remains relatively stable, leading to a strong short-term NPI price trend.

In terms of the price spread between NPI and refined nickel, the average discount of NPI to refined nickel was 285 yuan/mtu, narrowing by 63.3 yuan/mtu from a week ago. NPI prices hit a recent high this week due to tight market circulation resources and strong cost support, with rigid demand pushing market transaction prices to new highs. For refined nickel, the uncertain outlook of the US election increased market risk aversion, leading to a decline in non-ferrous metals, with weak fundamentals causing nickel prices to fall to around 124,000 yuan/mt. The weekly average price of refined nickel fell 3.71% MoM to 127,210 yuan/mt. The discount of NPI to refined nickel continued to narrow this week. In the short term, there is an expectation of NPI supply being less than demand, while nickel prices are expected to have limited downside due to cost support, with the price spread between the two expected to narrow next week but at a slower pace than this week.