Indonesian Policy Implementation, Nickel Prices May Continue to Fluctuate and Adjust [SMM Nickel Morning Meeting Summary]

4.24 Nickel Morning Meeting Minutes

Refined Nickel:

SMM Nickel, April 23:

Spot market: Today, the SMM 1# refined nickel price ranged from 125,700 to 128,150 yuan/mt, with an average price of 126,925 yuan/mt, up 225 yuan/mt from the previous trading day. The mainstream spot premium for Jinchuan No.1 nickel was quoted at 2,100-2,400 yuan/mt, with an average premium of 2,250 yuan/mt, unchanged from the previous trading day. The premium/discount for Russian nickel was quoted at 200-300 yuan/mt, with an average premium of 250 yuan/mt, up 100 yuan/mt from the previous trading day.

Futures market: The most-traded SHFE nickel contract continued its fluctuating trend from yesterday, closing at 125,770 yuan/mt at 11:30, up 0.19% from the previous trading day's settlement price.

In the short term, nickel prices may continue to fluctuate, with the tug-of-war between longs and shorts focusing on the cost support from the implementation of Indonesian policies and the imbalance in supply and demand fundamentals.

Nickel Sulphate:

Recently, due to the continuous rise in futures prices and the increase in the MHP coefficient. As of now, the MHP coefficient (relative to the SMM battery-grade nickel sulphate index) is 84%-85%, and the FOB price of Indonesian MHP is $12,565/mt (Ni contained).

From the demand side, some nickel salt producers still have raw material restocking needs in Q2, but due to the persistently high MHP pricing coefficient, nickel salt companies remain in a wait-and-see attitude, delaying the procurement process. On the supply side, recent flood disasters have limited MHP production in Indonesia, and a significant impact is expected in April. On the cost side, Indonesia's latest PNBP royalty policy is tentatively set to take effect on the 26th, which will directly increase the sales cost of nickel ore. Market feedback shows that the policy-induced rise in wet-process nickel ore procurement prices has already been reflected in early April. Moreover, the royalty on wet-process ore itself is relatively low, and for a 1.3-grade nickel ore, it requires an additional payment of about $0.75/wmt compared to before the PNBP amendment. Therefore, the PNBP policy is expected to have a relatively limited impact on MHP production costs in the short term.

Nickel Pig Iron:

April 23, SMM: The average price of 8-12% high-grade NPI was 974 yuan/mtu (ex-factory, tax included), down 2 yuan/mtu from the previous working day. On the supply side, domestically, smelter profits are beginning to tighten, and some high-cost smelters are experiencing deeper losses, with weak production driving low output. In Indonesia, the premium for local ore remains stable, and smelter cost lines are generally stable with a slight rise, but the decline in spot prices has already breached the cost lines of some smelters, with production driving weakening in sync with the domestic side, and overall output remains stable. On the demand side, stainless steel spot prices are at a low level in recent years, and the immediate raw material costs are already inverted, leading to weak procurement demand from downstream stainless steel mills in the short term. The market transaction center continues to shift downward, and high-grade NPI prices are expected to remain under pressure in the short term.

Stainless Steel:

April 23, last night's news showed that US President Trump stated that current tariffs on China are too high and plans to significantly reduce taxes, releasing a positive signal of tariff war easing. At the same time, Trump clearly stated that he has no intention of firing Fed Chairman Powell, and this series of remarks has significantly cooled market risk aversion. As a result, the futures market performed strongly overall, with all varieties rising except for gold, and SS futures also rebounded after the daytime session opened. However, despite the rebound in futures prices, the spread between futures and spot prices for stainless steel remains significant. Due to lingering doubts about the subsequent trend, cautious wait-and-see sentiment prevails, and downstream procurement enthusiasm has not been effectively boosted, with market transactions remaining weak. Current market transactions are still dominated by low-priced warrants, and overall trading activity has not improved significantly.

Futures side, the most-traded contract 2506 stopped falling and began to rebound. At 10:30 am, SS2506 was quoted at 12,785 yuan/mt, up 75 yuan/mt from the previous trading day. In Wuxi, the premium/discount for 304/2B spot was in the range of 435-585 yuan/mt. In the spot market, the cold-rolled 201/2B coil in Wuxi and Foshan was quoted at 8,250 yuan/mt; the cold-rolled cut edge 304/2B coil in Wuxi averaged 13,125 yuan/mt, and in Foshan averaged 13,155 yuan/mt; the cold-rolled 316L/2B coil in Wuxi was 23,650 yuan/mt, and in Foshan was 23,800 yuan/mt; the hot-rolled 316L/NO.1 coil was quoted at 22,900 yuan/mt in both regions; the cold-rolled 430/2B coil in Wuxi and Foshan was 7,500 yuan/mt.

Currently, although the US has released signals of tariff easing, specific policy measures have not yet been announced, and the subsequent impact on the market remains uncertain. At the spot market level, even as the Labour Day holiday approaches, the expected pre-holiday stockpiling boom has not arrived. Dominated by cautious wait-and-see sentiment, market transactions continue to be sluggish. Although current stainless steel prices are at relatively low levels, against the backdrop of persistently weak downstream demand, prices are unlikely to rebound significantly in the short term. Overall, stainless steel prices are expected to remain stable in the short term.

Nickel Ore:

Last week, the price of low-Ni, high-Fe ore in the Philippines remained stable. From a supply and 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 announcement 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 NPI 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, the FOB price for NI1.25% nickel ore in Zambales was $32 during the week, with CIF costs remaining above $43, but as shipments shift to Surigao, FOB prices may see a slight decline. On the ocean freight side, ocean freight rates fell slightly during the week, with the rate from Surigao to Lianyungang, China, down $10-10.5/wmt. Overall, SMM expects that due to the combined impact of 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 the PNBP policy once again fueling expectations of implementation, and multiple factors 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, the delivery-to-factory price for 1.6% local ore was about $51-52/wmt; for hydrometallurgical ore, the delivery-to-factory price for 1.3% local ore was about $25-26/wmt, unchanged WoW. In April, the mainstream premium for nickel ore procurement in the Sulawesi Island park remained at $24-25, and the CIF price 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 for a long time, and rainfall remained frequent during the week, affecting 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 NPI smelters are generally low, and just-in-time restocking is needed. Combined with the expectation of NPI production increases, demand support still exists. Overall, SMM expects that the supply of pyrometallurgical ore in Indonesia may continue to be tight. For hydrometallurgical ore: on the supply side, the tight supply of hydrometallurgical ore was not obvious during the week. On the demand side, the accident at the hydrometallurgical project in the Sulawesi park affected MHP demand in April. Overall, the supply of hydrometallurgical ore is relatively sufficient.

On the policy side, Trump's tariff policy impacted nickel prices, and the decline in downstream nickel product prices and the compression of profit margins may be transmitted to the nickel ore side in the future, leading to price and premium declines. However, Indonesia is once again fueling expectations of the PNBP policy implementation. If the policy is implemented next week, the increase in royalties will raise the sales cost of nickel ore, providing some support for nickel ore prices.

Overall, the nickel ore market is currently mixed with long and short factors, but the main theme of tight supply remains. The future price trend will depend on the negotiations between companies and mines on "whether to lower the premium in late April" and the continuation of the rainy season in Indonesia. SMM expects that the price of local nickel ore in Indonesia will remain stable in the short term, with limited downside room.