The increase in costs of nickel ore and nickel pig iron supported the strengthening of nickel prices. [SMM Nickel Morning Meeting Minutes]

3.31 Nickel Morning Meeting Minutes Refined Nickel: Last week, nickel prices showed a fluctuating upward trend, with spot prices ranging from 128,600 to 133,300 yuan/mt, while SHFE nickel futures prices (2505 contract) fluctuated between 128,250 and 132,000 yuan/mt. On the macro front, the Indonesian government plans to increase the nickel ore tax rate to 14%-19%, and the market generally expects that the implementation of this policy will increase the costs of nickel ore and nickel pig iron, providing some support to nickel prices in the short term. On the fundamental side, the rainy season in the Philippines is nearing its end, and nickel ore shipments are expected to increase, but current supply remains tight, with prices for medium and high-grade nickel ore showing some softening, while Indonesian nickel ore prices remain stable with a strong trend. Domestic nickel ore supply is tight, leading to weak production drivers at smelters, while Indonesian nickel pig iron production remains stable. In terms of downstream demand, the stainless steel sector overall performed weakly, with some steel mills resuming production after the Chinese New Year, but overall supply is limited, and market recovery is slow, with downstream operating rates and order volumes generally weak, leading to inventory buildup in stainless steel. It is expected that SHFE nickel prices will continue to be influenced by Indonesian tax policies next week, maintaining a fluctuating upward trend. Nickel Sulphate: Last week, the SMM battery-grade nickel sulphate index price was 28,023 yuan/mt, with the quotation range for battery-grade nickel sulphate at 27,970-28,550 yuan/mt, and the average price increased WoW. From the supply side, due to limited acceptance of MHP prices by nickel salt smelters, some nickel salt smelters have already cut production, resulting in relatively limited supply of nickel sulphate in the market. Tight supply in the nickel salt market has led to a widespread sentiment among nickel salt smelters to stand firm on quotes. On the demand side, during March, precursor plants mainly met production needs through destocking, and their inventories have now dropped to relatively low levels, leading to strong demand for restocking nickel salt. This week, precursor plants' acceptance of spot prices for nickel salt has also increased. Some precursor plants have already started negotiating long-term contracts for Q2, but due to the firm sentiment of nickel salt smelters to stand firm on quotes, negotiations for Q2 contracts are still ongoing and have reached a stalemate. Overall, given the tight supply in the nickel salt market and the sentiment of smelters to stand firm on quotes, it is expected that nickel sulphate prices will continue to show an upward trend next week. Nickel Pig Iron: Last week, the weekly average price of SMM 8-12% high-grade NPI was 1,025 yuan/mtu (ex-factory, tax included), up 8.5 yuan/mtu WoW, while the Indonesian NPI FOB index increased by $0.7/mtu WoW. This week, high-grade NPI prices have further increased. On the supply side, domestically, current nickel ore prices are rising, leading to higher domestic production costs, coupled with low raw material inventories, resulting in limited production drivers and stable production. In Indonesia, the Morowali Industrial Park was affected by heavy rainfall and severe flooding during the week, but it has not yet impacted pyrometallurgy smelters, and overall production in Indonesia continues to show a slight increase. On the demand side, destocking of stainless steel social inventories is slow, and stainless steel mills' willingness to purchase raw materials is weak, but traders have strong expectations for the future market, leading to significant purchases during the week and further tightening of market resources. It is expected that high-grade NPI prices will continue to show a relatively stable with strong trend in the short term. Stainless Steel: Last week, the stainless steel futures market overall showed a fluctuating upward trend. The most-traded contract 2505 price rose from around 13,350 yuan/mt at the beginning of the week to 13,550 yuan/mt on Friday, showing a strong increase. On the cost side, rising prices of raw materials such as high-grade nickel pig iron have supported futures prices; on the supply and demand side, downstream just-in-time procurement continues, and inventories remain at relatively high levels. Overall, cost support and a loose supply situation remain unchanged, and the short-term trend may continue to fluctuate upward, while the long-term trend will depend on the recovery of downstream demand. It is expected that next week, the futures market may continue to fluctuate upward due to downstream demand expectations and cost support from the raw material side. Nickel Ore: Last week, prices for low-grade and high-grade nickel ore in the Philippines remained stable, while FOB prices for medium and high-grade nickel ore increased during the week, with medium and high-grade nickel ore prices showing a slight increase again, mainly due to two reasons: first, as an exporting country, Indonesia's nickel ore prices have risen and are still expected to increase, providing some support to the export prices of Philippine nickel ore; second, from a supply and demand perspective, the Surigao region has started to offer and ship this month, but supply recovery has been slow due to weather conditions, while on the demand side, most domestic nickel pig iron mills still have low inventories, leading to strong demand for just-in-time procurement of raw materials. However, although the current rise in downstream high-grade nickel pig iron prices has brought some profit recovery, domestic iron mills are still in a state of losses, and their ability to accept high-priced nickel ore is limited. In terms of ocean freight rates, ocean freight rates decreased slightly during the week, with rates from Surigao to Lianyungang, China, decreasing by around $0.5/wmt. Overall, due to the combined impact of strong supply and weak demand and rising Indonesian nickel ore prices, Philippine prices have increased. SMM expects that Philippine nickel ore prices may continue to show a strong trend in the short term. Current market transaction prices: for pyrometallurgy ore, SMM's weekly price for Indonesia's local ore at 1.6% is $51/wmt, while for hydrometallurgy ore, SMM's weekly price for Indonesia's local ore at 1.2% is $26/wmt. Indonesian pyrometallurgy nickel ore may see another increase in April, with current April premiums of $23-25 under negotiation, while hydrometallurgy ore CIF prices may remain stable with a weak trend. From a supply perspective, this year's prolonged rainy season in Sulawesi has had a certain impact on the mining and transportation of nickel ore, and supply recovery in main mining areas such as Sulawesi has been relatively slow. Additionally, the Indonesian Lebaran holiday from late March to early April, during which mines and workers take a break, will also affect nickel ore supply. From a demand perspective, raw material inventories at Indonesian nickel pig iron smelters are generally low, leading to strong demand for just-in-time restocking, coupled with expectations of NPI production increases, demand-side support remains. SMM expects that nickel ore supply may continue to be tight. In terms of policies, the expectation for the PNBP policy to be implemented soon remains strong. If the policy is implemented, the sales costs of nickel ore mines will increase, and with the current continuous rise in downstream NPI and MHP prices, from the current market situation, mines have strong bargaining power, and the cost increase brought by this policy may be largely passed on to downstream enterprises, providing strong support for nickel ore prices. For hydrometallurgy ore, downstream MHP has strong expectations for production cuts in the short term, leading to significantly weaker demand support, and prices may show a weak trend. Overall, SMM expects that Indonesia's local pyrometallurgy nickel ore prices may continue to show an upward trend, while Indonesia's local hydrometallurgy nickel ore prices may remain stable with a weak trend.