High-Grade NPI Prices Continue to Rise, Domestic Smelters' Losses Somewhat Eased [SMM Analysis]

This week, the weekly average price of SMM 8-12% high-grade NPI was 968.8 yuan/mtu (tax-included ex-factory price), up by 12.1 yuan/mtu WoW. Meanwhile, the Indonesian NPI FOB index also increased by $1.8/mtu WoW, indicating a continued upward trend in high-grade NPI prices this week.

Supply side, domestic NPI smelters are currently operating at a loss, keeping production at low levels. In Indonesia, changes in production management in some regions have led to low-capacity operations on production lines. Nevertheless, other smelters still have some profit margins, maintaining production momentum, though overall production is expected to decline.

Demand side, the stainless steel market gradually resumed operations after the holiday, with market sentiment improving. However, due to sufficient raw material reserves at stainless steel mills earlier, their interest in purchasing high-grade NPI this week was low. Cost side, the premium on Indonesian nickel ore increased, and high-grade NPI prices are expected to remain relatively stable with a strong trend in the short term, supported by costs.

Notably, the average discount of high-grade NPI to refined nickel this week was 271.95 yuan/mtu, narrowing by 20.7 yuan/mtu WoW. This indicates that under the trend of tight market supply, traders actively purchased, pushing the market center upward.

In the refined nickel market, macro factors such as the easing impact of US tariffs and the Russia-Ukraine conflict entering negotiation stages provided positive signals for the macro environment, benefiting base metals and leading to a rebound in refined nickel prices this week. However, from a fundamental perspective, refined nickel demand remains under pressure, especially with post-holiday downstream alloy demand performing poorly. Nevertheless, with continuous transfer to delivery warehouses on the LME, refined nickel production remains stable, limiting the upward momentum for nickel prices.

Overall, high-grade NPI prices are likely to continue rising in the short term amid tight market circulation and high one-off pricing. Refined nickel prices, however, may face downside risks due to weak fundamentals. The average discount of high-grade NPI to refined nickel is expected to continue narrowing. Cost side, considering nickel ore prices, the losses at high-grade NPI smelters have slightly reduced in the short term.

Analyzing auxiliary material prices this week, coking coal and coke prices remained relatively weak, with upstream inventory continuing to increase. Although downstream demand improved, it was not strong. As a result, coking coal and thermal coal prices remained sluggish this week. On the nickel ore side, due to the rainy season in the Philippines, both supply and demand for nickel ore were weak, with prices remaining stable. The alleviation of smelter losses this week was mainly attributed to the rise in high-grade NPI prices and the easing of auxiliary material cost pressures. Next week, with downstream demand improving, auxiliary material prices are expected to rebound, while nickel ore prices are likely to remain strong and stable. Against the backdrop of strong market expectations, losses at high-grade NPI smelters are expected to further narrow.

》Click to View SMM Stainless Steel Spot Historical Prices

》Click to View SMM Stainless Steel Industry Chain Database