The Stainless Steel Consumption Failed to Prosper in the Peak Season, NPI Prices Faced Downward Pressure [SMM Analysis]

During the week, the average price of SMM 8-12% high-grade NPI was 999.9 yuan/mtu (ex-factory, tax included), down 1.8 yuan/mtu WoW. Meanwhile, the Indonesian NPI FOB index also fell by $0.6/mtu WoW. Overall, the transaction prices of NPI started to weaken last week.

Supply side, domestically, nickel ore prices remained high, while NPI prices are expected to fall, shrinking smelters' profits. Considering these factors, domestic NPI supply in September is not expected to see a significant increase. In Indonesia, new NPI production lines began operation ahead of schedule, but the ramp-up of nickel ore supply was lower than expected, causing smelters to maintain low raw material inventories and limited capacity growth.

Demand side, the traditional peak season for stainless steel did not start well, with spot prices dropping significantly. However, due to pre-holiday restocking ahead of the upcoming National Day holidays and the traditional peak season for production in H2, stainless steel production is still expected to increase significantly, which will in turn support NPI demand.

Overall, despite simultaneous signs of strengthening supply and demand for NPI, the substantial drop in stainless steel and nickel prices exerted considerable pressure on NPI prices. In the short term, NPI prices might fluctuate downward.

Additionally, the average discount of high-grade NPI to refined nickel was 260.6 yuan/mtu, narrowing by 48.9 yuan/mtu WoW. The price of high-grade NPI began to fall at the start of the week. The traditional September-October peak season had a rocky start, and the expanded decline in stainless steel prices intensified market panic, spilling over to the raw materials market and further driving NPI prices down.

Regarding refined nickel, the August non-farm payrolls data and macroeconomic indicators were lower than expected, which negatively impacted the ferrous metals market. Refined nickel prices saw a significant drop, with LME nickel falling below $16,000/mt and SHFE nickel under 125,000 yuan/mt during the week. The discount of high-grade NPI to refined nickel started to narrow within the week.

In the short term, although cost support for high-grade NPI limits its price decline, nickel prices, influenced by the macroeconomic environment, might continue to face downward risks. The price spread between NPI and refined nickel is expected to further narrow this week.