Downstream Enters Raw Material Stocking Cycle; Short-Term Ferronickel Prices Remain Strong [SMM Analysis]

This week, the high-grade NPI market continued its upward price trend. During the week, the SMM 8-12% high-grade NPI average price was 987.8 yuan/mtu (ex-factory, tax included), up by 9.4 yuan/mtu WoW. Meanwhile, the Indonesian NPI FOB index in the international market also increased by $1/mtu WoW. Overall, high-grade NPI prices maintained an upward trend.

On the supply side, the profit losses of domestic smelters eased to some extent this week. However, production remained at a low level due to the depletion of nickel ore inventory. In Indonesia, the Ramadan period and the failure of nickel ore supply to increase as expected resulted in limited actual output growth at local smelters. Additionally, production adjustments in some regions have not fully recovered, leading to only a slight increase in production.

On the demand side, as the stainless steel market gradually emerged from the post-holiday recovery period, stainless steel production plans increased significantly, driving up demand for high-grade NPI. Furthermore, supported by firm raw material prices, stainless steel finished product prices rebounded this week, prompting stainless steel mills to set new highs for raw material procurement prices. Therefore, in the short term, high-grade NPI prices are expected to continue a steady upward trend.

From the perspective of raw material economics, the average discount of high-grade NPI to refined nickel this week was 289.5 yuan/mtu, widening by 20.65 yuan/mtu WoW, indicating that high-grade NPI's competitive advantage in the market further strengthened. Meanwhile, downstream stainless steel mills actively stockpiled, and concentrated procurement activities pushed market prices higher.

On the macroeconomic level, data during the week showed that US economic indicators for February fell short of market expectations, weakening confidence in the US economic recovery. This led to a decline in the US dollar index, which supported base metals, including nickel. Nickel prices rebounded this week.

Additionally, the introduction of new pricing formulas for Indonesian nickel ore and major smelting products heightened market expectations of a nickel resource shortage in Indonesia, further supporting nickel prices. In the short term, under the cost support and tight supply-demand expectations, high-grade NPI prices are likely to have further room for growth.

From a cost perspective, due to changes in nickel ore prices 25 days ago, the calculated cash cost of high-grade NPI showed that domestic smelters' losses further eased this week. On the raw material side, auxiliary material prices continued to decline, as stockpiling persisted due to policies such as carbon steel production restrictions, leading to further price weakness. On the ore side, nickel ore prices increased slightly, influenced by the rainy season in the Philippines.

In summary, as the price center of the high-grade NPI market continues to rise, smelters' profit losses may further recover. Next week, auxiliary material prices are expected to continue declining amid weakening downstream demand, while nickel ore prices are likely to remain firm due to seasonal factors. Therefore, the market outlook for high-grade NPI remains optimistic.

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