The Implementation of Indonesia's PNBP Policy Weakens Cost Support for Stainless Steel [SMM Nickel Morning Meeting Minutes]

4.18 Nickel Morning Meeting Summary Refined Nickel: SMM reported on April 17 that in the spot market, the price of SMM1# refined nickel ranged from 125,950 to 128,900 yuan/mt, with an average price of 128,775 yuan/mt, up 2,500 yuan/mt from the previous trading day. The mainstream spot premium for Jinchuan No.1 nickel was quoted at 2,700-2,800 yuan/mt, with an average premium of 2,750 yuan/mt, down 100 yuan/mt from the previous trading day. The premium/discount for Russian nickel was quoted at 0-300 yuan/mt, with an average premium of 150 yuan/mt, down 75 yuan/mt from the previous trading day. In the futures market, the most-traded SHFE nickel contract opened higher and surged in the early session, reaching a high of 126,400 yuan/mt. As of 11:30, the closing price was 126,000 yuan/mt, up 1.50% from the previous trading day's settlement price. Today, the nickel market continued to fluctuate upward, with spot prices rising further. The implementation of Indonesia's new resource tax regulations and cost support pushed the price center higher. However, the supply-demand imbalance and inventory pressure remain, and market sentiment is cautious. Nickel Sulphate: On April 17, the SMM battery-grade nickel sulphate index price was 27,757 yuan/mt, with the quotation range for battery-grade nickel sulphate at 27,750-28,350 yuan/mt. The average price fell slightly compared to the previous day. Cost side, based on the reduction of Indonesian high-ice nickel, market demand for MHP increased, driving the MHP coefficient to rise continuously. Recent floods in Indonesia have reduced MHP supply, further pushing up the MHP quotation coefficient. Supply side, due to lower production costs this week, some non-primary nickel salt smelters have lowered their quotations. Some primary nickel salt smelters have also loosened their quotations. Demand side, some precursor plants have not yet stocked up enough nickel salt for April, and there is still procurement demand this week. However, their price acceptance has declined. Looking ahead, nickel sulphate prices are expected to decline due to weakening costs, but the decline is expected to be limited due to tight supply and demand for nickel salt. Nickel Pig Iron: On April 17, the average price of SMM 8-12% high-grade NPI was 985 yuan/mtu (ex-factory, tax included), down 4.5 yuan/mtu from the previous working day. Supply side, domestically, current nickel ore inventories at domestic smelters are low, coupled with declining smelter profits, some companies are still in maintenance periods, and overall production remains low. In Indonesia, short-term local ore premiums have stabilized, with strong cost support for smelters, while production remains stable despite declining profits. Demand side, stainless steel prices have recently fallen sharply, market procurement sentiment is weak, and stainless steel mills have weak demand for raw material procurement. In the short term, high-grade NPI prices remain under pressure. Stainless Steel: On April 17, SS futures prices continued to remain steady. Although the market has shown some willingness to explore price increases, current futures prices are low, and some traders have obtained lower-priced warrant cargo through pricing, which is significantly lower than other spot specifications, making it difficult to reach high-price transactions. At the same time, high-grade NPI prices continue to fall, and high-carbon ferrochrome prices have stopped rising and started to pull back, which has weakened the cost support for stainless steel. In the futures market, the most-traded contract 2506 fluctuated. At 10:30 am, SS2506 was quoted at 12,890 yuan/mt, up 65 yuan/mt from the previous trading day. In Wuxi, the premium/discount for 304/2B spot was in the range of 380-580 yuan/mt. In the spot market, cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 8,300 yuan/mt; cold-rolled cut edge 304/2B coils in Wuxi averaged 13,200 yuan/mt, and in Foshan averaged 13,225 yuan/mt; cold-rolled 316L/2B coils in Wuxi were quoted at 23,650 yuan/mt, and in Foshan at 23,800 yuan/mt; hot-rolled 316L/NO.1 coils in both regions were quoted at 22,900 yuan/mt; cold-rolled 430/2B coils in Wuxi and Foshan were both quoted at 7,500 yuan/mt. Currently, market expectations for macro policies remain unclear. Although the futures market rebounded to some extent this week, and spot prices have basically stopped falling and stabilized, downstream end-users' willingness to purchase remains very weak, with most maintaining a cautious wait-and-see attitude. Based on this, stainless steel prices are expected to remain stable in the short term. Nickel Ore: Last week, prices for low-Ni, high-Fe ore in the Philippines remained stable. From a supply-demand perspective, the rainy season in the southern Philippines has basically ended, and shipments of medium-grade nickel ore from Surigao are expected to increase. On the demand side, after the introduction of Trump's tariff policy, nickel prices fell sharply, and domestic NPI prices fell during the week, reducing acceptance of high-priced nickel ore. From an inventory perspective, domestic nickel iron plant inventories are relatively low, and just-in-time procurement demand still exists, but acceptance of nickel ore prices is limited. On the cost side, FOB quotations for NI1.25% nickel ore in Zambales were $32/wmt, with CIF costs remaining above $43/wmt, but FOB prices may see a slight decline as shipments shift to Surigao. On ocean freight rates, rates fell slightly during the week, with rates from Surigao to Lianyungang, China, down $10-10.5/wmt. Overall, SMM expects that due to increased supply and falling downstream NPI prices, Philippine nickel ore prices may see a slight decline in the future. Last week, global nickel prices fell sharply, with Trump's tariff policy and PNBP policy expectations resurfacing, disturbing the market. However, as nickel ore orders for the first half of April have already been signed, transaction prices remained stable this week. This week's transaction prices in the Indonesian market: for pyrometallurgical ore, local ore with 1.6% Ni was quoted at $51-52/wmt, and for hydrometallurgical ore, local ore with 1.3% Ni was quoted at $25-26/wmt, unchanged WoW. In April, the mainstream premium for nickel ore procurement in the Sulawesi Island park remained at $24-25, and CIF prices for hydrometallurgical ore remained stable but weak. From a supply perspective, for pyrometallurgical ore: on the supply side, the rainy season in Sulawesi Island has lasted longer, with frequent rainfall during the week, which has affected nickel ore mining and transportation. However, overall, rainfall in Indonesia is expected to gradually decrease from April, and nickel ore supply may increase. On the demand side, downstream NPI prices were impacted by the decline in nickel prices due to Trump's tariff policy, and NPI prices fell significantly during the week, weakening support for nickel ore prices. From an inventory perspective: raw material inventories at Indonesian nickel iron smelters are generally low, and just-in-time restocking is needed. Combined with expectations of increased NPI production, demand support remains. Overall, SMM expects that the supply of pyrometallurgical ore in Indonesia may remain tight. For hydrometallurgical ore: on the supply side, tight supply of hydrometallurgical ore was not obvious during the week. On the demand side, accidents in hydrometallurgical projects in the Sulawesi Island park affected MHP demand in April. Overall, the hydrometallurgical ore market is relatively well supplied. On the policy side, Trump's tariff policy has impacted nickel prices, and the decline in downstream nickel product prices and compressed profit margins may be transmitted to the nickel ore end in the future, leading to price and premium declines. However, the implementation of the PNBP policy has provided some support for nickel ore prices. Overall, the nickel ore market is currently mixed with both positive and negative factors, but the main theme remains tight supply. Future price trends will depend on negotiations between companies and mines on "whether to lower premiums in late April" and the continuation of the rainy season in Indonesia. SMM expects that local nickel ore prices in Indonesia will remain stable in the short term, with limited downside room.