High-Grade NPI Prices Rebound as Tight Market Supply Drives Price Recovery [SMM Analysis]

This week, the average price of SMM 8-12% high-grade NPI was 941.1 yuan/mtu, up by 5.2 yuan/mtu WoW. Meanwhile, the Indonesian NPI FOB index also increased by $1.3/mtu WoW, indicating further recovery in market prices.

In terms of supply, domestic high-grade NPI production was affected by previously weak prices, leading to intensified losses for smelters. This prompted some smelters to conduct equipment maintenance and reduce production loads, resulting in a slight decline in output. In contrast, with improved weather conditions in Indonesia and profit-driven operations, most enterprises did not have expectations for production cuts, providing some support to supply.

On the demand side, market activity weakened due to the approach of the Chinese New Year. The high proportion of long-term contracts at stainless steel mills, coupled with market optimism about future price trends, led to limited circulating resources and a price recovery. High-grade NPI prices are expected to remain stable with a slight upward trend after the holiday.

Notably, the average discount between high-grade NPI and refined nickel narrowed to 319.55 yuan/mtu this week, down by 20.1 yuan/mtu WoW, reflecting a slight rise in high-grade NPI prices. Due to tight circulating resources in the market, high-grade NPI prices are likely to continue rising slightly.

In the refined nickel market, the Indonesian Nickel Miners Association officially announced that the 2025 RKAB quota has been approved at 298 million wmt. This news alleviated previous concerns about tightened nickel ore supply from Indonesia, putting pressure on nickel prices. Additionally, although exports remain profitable, the continuous increase in LME nickel inventory has hindered further price gains, leading to a pullback in LME nickel prices this week.

Overall, in the short term, high-grade NPI prices are expected to continue rising amid tight circulating resources, while refined nickel prices may remain under pressure due to inventory accumulation and bearish news on nickel ore. The discount between high-grade NPI and refined nickel is likely to narrow further.

From the raw material side, as the market gradually enters the Chinese New Year holiday, auxiliary material prices remained stable this week. In the Philippines, limited nickel ore shipments due to the rainy season resulted in sluggish transactions, with prices remaining stable. The continued rise in high-grade NPI prices has alleviated smelters' losses.

Looking ahead to next week, auxiliary material prices are expected to remain stable after the Chinese New Year, while nickel ore prices show no significant downward trend. With strong market confidence in the outlook, high-grade NPI prices are likely to maintain a steady upward trend, further improving smelters' profitability.

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