Strong Outlook for High-Grade NPI Prices Amid Tight Nickel Ore Supply and Rising Demand

The weekly average price of SMM 8-12% high-grade NPI was 1,012.1 yuan/mtu (ex-factory, tax included), up 12.1 yuan/mtu WoW. The Indonesian NPI FOB index rose by $2.8/mtu WoW, and NPI prices continued to rise this week.

Supply side, domestically, although the rising spot prices have enhanced production motivation, the rising prices of Philippine nickel ore have pushed up the cost line for smelters, limiting short-term production increases. In Indonesia, recent easing of rainfall in the Weda Bay area has reduced the impact on transportation and mining, but RKAB approvals remain limited. With new production coming online, August output saw a slight increase.

Demand side, approaching the traditional peak season for stainless steel, production is expected to increase, and market inquiries and purchases remain active under rigid demand, with transaction prices hitting new highs.

In summary, Indonesian NPI is still affected by the ore supply, and domestic trade premiums have raised smelter costs. With the expected increase in domestic stainless steel production, high-grade NPI prices are expected to remain strong in the short term.

Regarding the price spread between high-grade NPI and refined nickel, high-grade NPI averaged a discount of 281.5 yuan/mtu to refined nickel during the week, narrowing by 15 yuan/mtu WoW. High-grade NPI prices continued to run strong during the week, with tight nickel ore resources pushing up the domestic trade premiums for Indonesian laterite nickel ore, increasing the smelting costs for high-grade NPI. Cost-driven factors and rigid demand procurement led to price fluctuations upward.

For refined nickel, nickel prices fluctuated and consolidated during the week, with a rebound in the night session on Thursday, mainly due to macroeconomic influences. The "recession panic" temporarily subsided, reducing the need for further downward revisions, which was favorable for non-ferrous metals. The discount of high-grade NPI to refined nickel narrowed from fluctuations during the week. In the short term, high-grade NPI is expected to run strong and stable with firm cost support and the opening of the rigid demand procurement window, while nickel prices may see upward adjustments due to macroeconomic influences. However, the weak fundamentals will limit the extent of these adjustments, and the price spread between the two is expected to continue narrowing next week.