The NPI market prices continue to weaken, and the supply-demand balance faces challenges

The weekly average price of SMM 8-12% high-grade NPI was 986.9 yuan/mtu (ex-factory, tax included), down 13 yuan/mtu WoW. The Indonesian NPI FOB index decreased by $1.7/mtu WoW. NPI prices continued to fluctuate downward this week.

Supply side, domestically, the economics of externally purchased NPI are currently better than self-produced, leading many companies to opt for external purchases. Integrated steel mills have low production due to cost pressures. In September, traditional smelters maintained stable operations, with some even increasing production, keeping overall output stable. However, this stability in supply has not effectively supported prices. In Indonesia, new capacity is gradually increasing, with new approvals for RKAB expected within the month. The tight supply of internal laterite nickel ore shows signs of easing, and NPI production in Indonesia is expected to continue increasing in September. These factors combined lead to a relatively ample supply expectation for NPI.

Demand side, although September is traditionally a peak season for stainless steel production, output remains high. However, due to the recent economic advantage of stainless steel scrap over NPI, stainless steel mills are gradually increasing the use of scrap, weakening demand for NPI. The market only sees small restocking at low prices, with overall demand remaining weak. This further exacerbates the weakness in the NPI market, with the market focus continuing to shift downward.

In summary, downstream demand for NPI is weak, burdened by the negative feedback from stainless steel profit losses and the economic advantage of stainless steel scrap. In the short term, NPI prices are likely to continue fluctuating downward. Meanwhile, the average discount of high-grade NPI to refined nickel was 236.3 yuan/mtu, narrowing by 24.3 yuan/mtu WoW. High-grade NPI prices fluctuated downward, while stainless steel futures fell to recent lows, with downstream profit losses negatively impacting raw materials, leading to recent lows in market transaction prices.

At the same time, for refined nickel, SHFE nickel futures experienced a deep drop followed by a fluctuating rebound, mainly due to the expected new approvals for Indonesian RKAB nickel ore, which pressured refined nickel prices. However, the US August CPI YoY rose 2.5%, with core MoM unexpectedly rising to 0.3%, the largest increase in four months, cooling expectations of a 50 basis point rate cut by the US Fed, benefiting the base metals market and driving a rebound in nickel prices. The discount between high-grade NPI and refined nickel first narrowed and then widened again. In the short term, high-grade NPI prices will continue to fluctuate downward, but the downside is limited due to cost support. Nickel prices may continue to rebound under the influence of positive US macroeconomic expectations, and the price spread between high-grade NPI and refined nickel is expected to widen further next week.

Overall, the NPI market remains weak under the combined influence of supply and demand, but changes in the stainless steel market and global macroeconomic conditions will continue to have a dual impact on prices, potentially increasing volatility. Further attention to the release of new capacity in Indonesia and changes in domestic and international macroeconomic indicators will help to gain a more comprehensive understanding of market trends.