Indonesian Ore Prices Rise While Philippine Mines Still Show Sentiment to Stand Firm on Quotes [SMM Nickel Morning Meeting Summary]

March 10 Nickel Morning Meeting Summary

Refined Nickel:

Last week, nickel prices fluctuated upward, with spot prices ranging between 127,400-129,700 yuan/mt, while SHFE nickel futures prices fluctuated between 124,600 yuan/mt and 131,400 yuan/mt, successfully breaking through the 130,000 yuan threshold. The pullback in the US dollar index provided support for base metals, and the ongoing rainy season in Indonesia and the Philippines also supported nickel ore prices. Although favourable macro factors boosted overall market optimism, refined nickel inventory remained high, limiting short-term upside potential. From a macro perspective, Indonesia's frequent policy announcements, particularly measures to control this year's RKAB quotas to stabilize nickel prices and the provisions on foreign exchange for natural resource exports in Presidential Decree No. 8, reflect the Indonesian government's intention to guide nickel prices and enhance product value. Additionally, the rainy season in the Philippines is nearing its end, with mines gradually offering March shipment quotes, and FOB transaction prices have softened compared to pre-rainy season levels. However, sentiment to stand firm on quotes for medium- to high-grade nickel ore remains. Domestically, stainless steel mills resumed operations after the holiday, showing optimism for high-grade NPI demand, but NPI producers' acceptance of high-priced nickel ore was limited, leading to a slight decline in tender prices for medium-grade Philippine nickel ore. Fundamentally, nickel ore supply remains tight, and the absolute price of nickel ore is expected to rise, albeit at a slower pace. The end of the rainy season in Sulawesi will impact the specific changes in nickel ore market circulation. Looking ahead to next week, nickel prices may continue to be influenced by the tug-of-war between favourable macro factors and bearish fundamentals, with short-term upside potential remaining, but overall gains are likely to be limited.

Nickel Sulphate:

Last week, the SMM battery-grade nickel sulphate index price was 26,916 yuan/mt, with the quotation range for battery-grade nickel sulphate at 27,040-27,760 yuan/mt. This week, the average price of battery-grade nickel sulphate increased compared to last week, reflecting an overall upward trend in the market. The nickel salt market this week exhibited strong cost support characteristics. On the supply side, the MHP coefficient continued to rise, coupled with stronger LME nickel prices, exacerbating losses for nickel salt smelters and intensifying sentiment to stand firm on quotes. On the demand side, fluctuations in cobalt prices increased losses for precursor plants, slowing their nickel salt procurement pace and reducing inquiry activity.

Considering these factors, the nickel salt market this week showed steady price increases driven by rising costs. Although demand remained relatively sluggish, the sentiment to stand firm on quotes among nickel salt smelters and just-in-time procurement needs from precursor plants are expected to sustain the upward trend in nickel salt prices in the short term.

NPI:

Last week, the weekly average price of SMM 8-12% high-grade NPI was 987.8 yuan/mtu (ex-factory, tax included), up 9.4 yuan/mtu WoW, while the Indonesian NPI FOB index rose by $1/mtu WoW. This week, high-grade NPI prices continued to rise. On the supply side, domestically, smelters' profit losses have eased, but nickel ore inventory depletion has bottomed out, and production remains at low levels. In Indonesia, the onset of Ramadan, combined with lower-than-expected nickel ore supply, limited smelter output increases. Additionally, production adjustments in some regions are unlikely to recover in the short term, resulting in only slight production increases. On the demand side, the stainless steel market is recovering post-holiday, with significant increases in stainless steel production schedules, boosting demand for high-grade NPI. Furthermore, strong raw material prices supported finished product prices, with stainless steel prices rising during the week. Stainless steel mills set new highs for raw material procurement prices, and high-grade NPI prices are expected to remain relatively stable with a strong trend in the short term.

Stainless Steel:

Last week, the stainless steel market saw a significant increase in activity, with prices trending upward and improved transaction performance. In the futures market, the most-traded stainless steel futures contract SS2505 fluctuated upward. As of 10:30 a.m. on March 7, the SS2505 contract price had risen significantly to 13,450 yuan/mt, up 200 yuan or 1.6%. Spot premiums/discounts for 304/2B fluctuated significantly, with stainless steel spot premiums in Wuxi ranging from -130 to 170 yuan/mt.

Stainless steel spot prices also showed a clear upward trend last week. On one hand, the continuous rise in raw material prices and the successive price increases by major mills jointly pushed market prices higher. For example, in the Wuxi and Foshan markets, prices for various stainless steel products rose to varying degrees compared to last Friday. In the Wuxi market, the price of 201/2B coils increased by 75 yuan, while 304/2B coils (mill edge) rose by 150 yuan. In the Foshan market, 201/2B coils increased by 75 yuan, and 304/2B coils (mill edge) rose by 50 yuan.

From a supply-demand perspective, demand is gradually recovering, with procurement volumes increasing, but transaction centers remain low. Although post-holiday market demand shows signs of recovery, overall transaction prices remain relatively low. On the supply side, steel mills' March production schedules have increased, ensuring ample market supply, and social inventory continues to rise. For instance, SHFE stainless steel registered warehouse warrant inventory increased significantly from 106,502 mt in the previous week to 155,766 mt, up by 49,264 mt.

Analyzing the main influencing factors, rising raw material prices have recently increased steel mills' production costs, leading to losses, which have supported stainless steel prices to some extent. On the macro front, favourable news on March 4 (policy-related benefits) triggered a rise in the futures market, which in turn drove price increases for some spot market products.

Overall, the current stainless steel spot market is in a delicate state of gradually recovering demand but ample supply. Prices have risen due to cost and macro factors. Looking ahead, the pace of social inventory destocking, steel mills' subsequent production schedules, and raw material price trends will be key factors influencing market direction, requiring close attention from market participants.

Nickel Ore:

Last week, FOB prices for medium- to high-grade Philippine nickel ore pulled back after peaking. In the low-nickel high-iron market, the rainy season in the Philippines is nearing its end, with mines gradually offering March shipment quotes. Current FOB transaction prices have softened compared to pre-rainy season levels. For medium- to high-grade nickel ore, rising Indonesian ore prices, combined with continued increases in downstream NPI prices, have sustained sentiment to stand firm on quotes among Philippine mines. However, domestic NPI producers' limited acceptance of high-priced nickel ore led to a slight decline in tender prices for medium-grade Philippine nickel ore. On the supply side, the rainy season in major southern mining areas is gradually ending, and Philippine shipments are expected to increase. On the demand side, the continued rise in downstream NPI prices has brought some profit recovery, but smelters' losses persist, limiting their acceptance of high-priced nickel ore. Currently, just-in-time restocking remains the primary approach. At ports, nickel ore inventory continues to decline. Regarding ocean freight rates, some rates have reached $11/mt, and with the end of the rainy season in major southern mining areas, shifts in shipping origins may lead to higher freight rates. Overall, Philippine nickel ore prices may continue to pull back after peaking in previous weeks, fluctuating downward.

Current market transaction prices: For pyrometallurgical ore, Indonesian nickel ore's mainstream premium price for March on Sulawesi Island is $19-20/wmt. The SMM Indonesian domestic trade laterite nickel ore 1.2% (delivery-to-factory price) ranges from $25.5-27.5/wmt, up $0.5/wmt WoW, or 1.8% MoM. The SMM Indonesian domestic trade laterite nickel ore 1.6% (delivery-to-factory price) ranges from $46.5-51.5/wmt, up $0.4/wmt WoW, or 0.9% MoM. Pyrometallurgical ore continues its upward price trend, but the increase has narrowed compared to February. On the supply side, the rainy season in major mining areas in Sulawesi, Indonesia, will gradually end in March, and Indonesian nickel ore supply is expected to increase. However, downstream smelters' just-in-time procurement demand remains, and supply may be affected around Ramadan and Eid al-Fitr. On the demand side, mid-tier smelters have just-in-time procurement needs this month, sustaining demand support. Inventory-wise, mid-tier pyrometallurgical enterprises generally maintain inventory levels below two months, and March procurement restocking sentiment remains high, boosting market transaction activity. For hydrometallurgical ore, the tight supply pace continues this year. Currently, hydrometallurgical ore on Sulawesi Island is priced at approximately $26/wmt (delivery-to-factory). With the ramp-up and commissioning of MHP projects this year, downstream demand is expected to increase. However, due to limited quotas, mines prefer to prioritize higher-margin pyrometallurgical ore, actively reducing hydrometallurgical ore sales, leading to faster price increases for hydrometallurgical ore compared to pyrometallurgical ore.

Key factors to watch include the impact of the mid-March HPM price announcement on Indonesian nickel ore prices, the actual circulation of domestic trade ore after the rainy season, and the new policy issued by Indonesia's Ministry of Energy and Mineral Resources this week, which adjusted the HPM pricing method. Although this policy does not directly affect nickel smelters, it has caused some market sentiment disturbances. Overall, Indonesian domestic trade ore prices in March are expected to remain relatively stable with a strong trend. Upstream shipments are expected to increase, and demand remains, but the overall tight supply pace for nickel ore may lead to slower price increases for Indonesian nickel ore.