High-Grade NPI Market Remains Weak, Supply-Demand Imbalance Intensifies Pressure [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 936.4 yuan/mtu (tax included), down by 3.7 yuan/mtu WoW. Meanwhile, the Indonesian NPI FOB index also decreased by $0.4/mtu WoW, reflecting a sluggish market.

Supply side, the domestic market saw shrinking profits for smelters due to the continuous decline in high-grade NPI prices, prompting some enterprises to adjust their production strategies, leading to a slight decrease in overall production. However, Indonesia's NPI supply continued to increase, mainly driven by the gradual release of new capacity. This supply-demand imbalance may exert further pressure on future market prices.

Demand side, stainless steel spot prices remained sluggish this week. The proportion of long-term contracts at major stainless steel mills increased, reducing external procurement demand. Additionally, as stainless steel entered its traditional maintenance period, demand for high-grade NPI significantly declined. Under such circumstances, high-grade NPI is expected to maintain a stable with a weak trend, supported by costs.

Notably, the price spread between high-grade NPI and refined nickel narrowed by 8.1 yuan/mtu WoW. Downstream stainless steel enterprises also saw weaker procurement prices for high-grade NPI, closely related to sufficient raw material inventory and increased long-term contract procurement volumes. In the refined nickel market, the complex global economic situation exerted some pressure on nickel prices. The US economy's stronger-than-expected performance, coupled with the conservative stance of the Eurozone and Japanese central banks, posed challenges for base metals in the short term. Meanwhile, overseas electrodeposited nickel expansion projects continued to progress, but weaker-than-expected demand further weighed on the fundamentals of refined nickel.

Cost factors also influenced market trends. Affected by nickel ore prices from 25 days ago, the cash cost of high-grade NPI posed challenges to smelters' profitability, leading to wider losses. Although auxiliary material prices stabilized this week, and the coking coal futures market rebounded with spot prices recovering slightly, coke prices remained low due to weak fundamentals, leaving smelters' auxiliary material costs largely unchanged. At the same time, nickel ore prices in the Philippines remained stable under the influence of the rainy season.

In summary, market uncertainty remains high. With reduced downstream crude steel output suppressing auxiliary material prices, nickel ore prices are expected to remain stable, and the high-grade NPI market will continue to face challenges. Smelters may adjust production strategies under the pressure of losses to cope with the complex market dynamics.

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