Strong Support for High-Grade NPI; Market Sentiment Heats Up, Driving Prices Higher [SMM Analysis]

During the week, the SMM 8-12% high-grade NPI weekly average price was 1,001.5 yuan/mtu (ex-factory, tax included), up by 13.7 yuan/mtu WoW. Meanwhile, the Indonesian NPI FOB index rose by $2.1/mtu compared to last week. These changes indicate that high-grade NPI prices continued to trend upward this week.

Supply side, the domestic high-grade NPI market remained tight. Although nickel ore supply from the Philippines gradually increased, it still requires time to ramp up. Currently, domestic smelters mainly rely on consuming previous inventories, with overall capacity at a low level. In Indonesia, smelters also maintained low nickel ore inventories, facing significant challenges in increasing production. Additionally, one major smelter continued to operate at low capacity. Despite the release of some new capacity, total production only saw a slight increase.

Demand side, the stainless steel market sentiment was strong this week, with robust order activity and record-high finished product prices. Stainless steel mills showed significantly increased purchase willingness for raw materials, pushing high-grade NPI transaction prices to new highs during the week. In the short term, high-grade NPI prices are expected to remain relatively stable with a strong trend.

Additionally, the weekly average discount of high-grade NPI to refined nickel widened to 321.7 yuan/mtu, up by 32.2 yuan WoW. Nickel prices fluctuated upward during the week, boosting market sentiment for downstream nickel smelting products. Limited availability of high-quality goods further drove transaction prices higher.

In the refined nickel market, macroeconomic factors played a role. US economic data fell short of market expectations, and uncertainties surrounding tariff policies provided some support to the non-ferrous metals market. Meanwhile, Indonesia's new nickel ore policies increased uncertainty regarding the country's nickel supply outlook, leading to fluctuating upward nickel prices.

Overall, in the short term, high-grade NPI prices are expected to strengthen further, supported by anticipated increases in nickel ore prices. Additionally, factors such as tightening market resources, rising cost lines, and tight Indonesian nickel resources suggest that nickel prices still have upward potential. The average discount of high-grade NPI to refined nickel may further widen next week.

Cost side, based on nickel ore prices from 25 days ago, high-grade NPI smelters continued to face losses. This week, auxiliary material prices stabilized after halting their decline during the recovery phase of the March commodity market, temporarily stabilizing the cost line for NPI auxiliary materials. On the mining side, as the downstream purchasing cycle began, nickel ore supply from the Philippines remained limited, with prices rising slightly.

This week, smelters' losses narrowed compared to last week. Next week, auxiliary material prices are expected to remain stable temporarily, while nickel ore prices may rise due to the rainy season in the Philippines. Against the backdrop of tight market circulation, high-grade NPI prices are likely to continue rising, and smelters' profit losses are expected to ease further.

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