Tug-Of-War Between Sellers And Buyers in The Nickel-Iron Market: Short-Term Stability Expected [SMM Analysis]

This week, high-grade NPI prices continued to weaken. The average ex-factory price of 8-12% high-grade NPI during the week was 940.1 yuan/mtu (including tax), down by 3.3 yuan/mtu WoW. Additionally, the Indonesian NPI FOB price index also decreased by $0.6/mtu WoW. This trend reflects the market's response to the supply-demand dynamics of high-grade NPI.

Supply side, the domestic market showed that smelters faced increasing losses due to the continued decline in finished product prices, with production remaining stable and no significant production cuts observed. In Indonesia, smelters maintained relatively sufficient raw material inventories and continued to achieve certain profit margins, leading to a slight increase in overall production. This indicates that despite price pressures, supply-side flexibility still exists.

Demand side, stainless steel spot prices showed signs of stabilization during this period, with steel mills seeing a recovery in order-taking and a short-term increase in speculative demand. This resulted in sustained raw material procurement demand from steel mills. However, procurement strategies have shifted significantly, with long-term contracts accounting for a larger proportion, while spot orders are mostly based on average prices. In the short term, high-grade NPI demand is expected to recover, and supported by costs, its prices are likely to remain relatively stable.

Notably, the average discount of high-grade NPI to refined nickel has reached 310.2 yuan/mtu, widening by 11.8 yuan/mtu WoW. Although high-grade NPI prices remain low, buyers still hold the upper hand in the market. With stainless steel prices stabilizing and sales improving, the sentiment for price suppression has eased, leading to a slower price decline this week.

For the refined nickel market, international markets were affected by holidays during the week, prompting shorts to gradually exit the futures market, resulting in a rebound correction in nickel prices. Fundamentally, newly added overseas refined nickel projects are still in the capacity ramp-up phase, while downstream demand has not shown significant growth, keeping the nickel market in a supply surplus expansion territory. Cost side, the current cost line remains stable, providing strong support for refined nickel prices. In the short term, although refined nickel prices face downside risks due to weak fundamentals, the strong cost support is expected to limit the extent of price declines.

Considering next week's market trends, the average discount of high-grade NPI to refined nickel is expected to fluctuate and narrow. Under the influence of various factors, high-grade NPI prices are likely to stabilize, while refined nickel prices may face slight downside room due to fundamental pressures.

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