US Fed meeting signals hawkish stance, SS futures strengthen rapidly after opening of daytime session [[SMM] Nickel Morning Meeting Summary]

5.9 Nickel Morning Meeting Summary

Macro News:

(1) In their May policy statement, US Fed officials indicated that Q1 GDP growth had turned negative. However, even so, the Fed's policy committee still believed that the underlying economy remained strong. They observed that the volatile trade statistics were the main reason for the contraction in GDP during Q1, as imports surged ahead of new tariffs. "Despite the fluctuations in net exports affecting the data, recent indicators suggest that economic activity continues to expand at a solid pace," the statement read. However, in the new language of this month's policy statement, officials also acknowledged that "the risks of higher unemployment and inflation have intensified."

(2) The US Fed kept interest rates unchanged for the third consecutive meeting, emphasizing that they believed the risks of both rising inflation and unemployment were increasing. The FOMC committee stated, "The uncertainties surrounding the economic outlook have increased further. The Committee is monitoring the risks to its dual mandate in both directions and judges that the risks of both high unemployment and high inflation have risen." Officials unanimously voted to maintain interest rates within the range of 4.25%-4.5%. The Fed indicated that it would continue to reduce its balance sheet at the pace announced at the March meeting. Trump's trade policies have sparked a wave of uncertainty throughout the economy. While tariffs are still under negotiation, economists generally expect that comprehensive tariffs will push up inflation and drag down economic growth. This will create an imbalance between the policy makers' two objectives (price stability and maximum employment).

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 123,500-126,300 yuan/mt, with an average price of 124,900 yuan/mt, a decrease of 750 yuan/mt from the previous trading day. The quotation range for the mainstream spot premiums of Jinchuan No.1 nickel is 2,100-2,400 yuan/mt, with an average premium of 2,250 yuan/mt, an increase of 100 yuan/mt from the previous trading day. The quotation range for premiums and discounts of Russian nickel is 0-300 yuan/mt, with an average premium of 150 yuan/mt, an increase of 25 yuan/mt from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2506) mainly fluctuated rangebound in the morning session. As of 11:30, the closing price was 124,330 yuan/mt, up approximately 0.2% from the settlement price of the previous trading day. In terms of inventory, LME nickel inventory was 200,082 mt as of May 6, continuing to destock by 336 mt, with overall inventory remaining at a high level. SMM domestic social inventory was approximately 44,100 mt, destocking by about 560 mt MoM.

Currently, bullish and bearish factors are intertwined in the nickel market, with nickel prices fluctuating rangebound.The upside pressure comes from weak downstream demand, high inventory pressure, and macroeconomic uncertainties, while the downside support relies on the cost line. Meanwhile, the refined nickel raw materials are in short supply, which will affect the supply in the short term.

Nickel Sulphate:

On May 8, the SMM index price for battery-grade nickel sulphate was 27,857 yuan/mt. The quotation range for battery-grade nickel sulphate was 27,860-28,370 yuan/mt, with the average price holding steady compared to the previous day.

Cost side, the MHP production in Indonesia in April was significantly impacted by floods, leading to a supply-demand gap and keeping its coefficient firm at highs. Overall, the MHP cost support is strong. Supply side, some nickel salt smelters have limited quantities available for external sale in the remaining days of May, resulting in firm quotations. Some nickel salt smelters have expectations for production cuts due to incomplete raw material stocking. Moreover, the current high raw material prices are pushing their prices to remain firm. Demand side, this week is not a traditional procurement phase, and some precursor plants have already stocked up on inventory for more than half a month, resulting in low procurement activity. Looking ahead, based on fundamental factors such as tight raw material supply, stable cost support, and downstream demand dependence, it is expected that nickel salt prices will show a mild upward trend in the short term.

NPI:

As of May 8, the average price of SMM 8-12% high-grade NPI was 947.5 yuan/mtu (ex-factory, tax included), down 3.5 yuan/mtu from the previous working day. Supply side, domestically, some smelters that underwent maintenance earlier have resumed production, coupled with a significant increase in port arrivals of nickel ore from the Philippines, supplementing the raw material inventory of smelters. However, due to deepening losses, the production increase is relatively limited. In Indonesia, the current domestic trade premium for nickel ore continues to hold up well, and the decline in finished product prices has breached the cost lines of some smelters. On this basis, the ramp-up of new capacity may slow down, and there are expectations for a slight decline in production. Demand side, the stainless steel market has performed relatively average after the holiday, with mainstream steel mills' plate prices continuing at pre-holiday levels. Spot transactions are mainly concluded at low prices, and stainless steel mills maintain low prices for forward raw material procurement. It is expected that under the background of a decline in stainless steel mills' production schedules, the price of high-grade NPI will remain under pressure in the short term.

Stainless Steel:

As of May 8, the SMM reported that the market was influenced by multiple news factors today, leading to sharp fluctuations. On one hand, the US Fed meeting released hawkish signals, suggesting that the interest rate cut process may be delayed. On the other hand, Trump declared that a trade agreement would be reached with a certain major country that night, and expectations for tariff reductions boosted market sentiment. Stimulated by these two factors, SS futures strengthened rapidly after the opening of the daytime session. However, the market rally could not be sustained.As nickel prices and ferrous metals series futures declined overall, SS futures came under pressure, with gains rapidly narrowing and shifting to a pullback trend. Despite the market's upward momentum, downstream end-users remained cautious in their procurement, with limited acceptance of high-priced resources, leading to a generally stable performance of stainless steel spot prices, which did not follow the volatile futures market.

In the futures market, the most-traded contract 2506 experienced an upward exploration followed by a pullback. At 10:30 a.m., SS2506 was quoted at 12,780 yuan/mt, up 30 yuan/mt from the previous trading day. In the Wuxi region, the spot premiums/discounts for 304/2B stainless steel ranged from 340-540 yuan/mt. In the spot market, cold-rolled 201/2B coils in both Wuxi and Foshan were quoted at 8,050 yuan/mt. For cold-rolled cut edge 304/2B coils, the average price was 13,050 yuan/mt in Wuxi and the same in Foshan. Cold-rolled 316L/2B coils were priced at 23,850 yuan/mt in Wuxi and the same in Foshan. Hot-rolled 316L/NO.1 coils were quoted at 23,050 yuan/mt in both regions. Cold-rolled 430/2B coils were priced at 7,500 yuan/mt in both Wuxi and Foshan.

Currently, the supply side of the stainless steel market remains at a high level. Under the severe pressure of losses, producers have actively adjusted their strategies, significantly reducing the production of heavily loss-making 300-series stainless steel and shifting their production focus towards 200-series and 400-series products to optimize the steel grade structure. However, frequent recent policy changes have introduced significant uncertainty into the market. Downstream enterprises, concerned about market prospects, have generally adopted a cautious and conservative business strategy, not only becoming more prudent in procurement but also experiencing a sustained slump in consumer demand. This imbalance between high supply and weak demand has become a core factor hindering the healthy development of the current stainless steel market.

Nickel Ore:

Philippine Nickel Ore: Today, the offer prices for Philippine laterite nickel ore mines have loosened, with FOB prices for medium- to high-grade nickel ore declining. Today, the CIF price for Philippine laterite nickel ore with 1.3% NI is 43.5-45 US dollars/wmt, down 0.25 US dollars/wmt, and the FOB price for 1.3% NI is 32-35 US dollars/wmt, down 1.5 US dollars/wmt. The CIF price for 1.5% NI is 59-60 US dollars/wmt, down 1 US dollar/wmt, and the FOB price for 1.5% NI is 47-50 US dollars/wmt, down 2.5 US dollars/wmt.

In terms of supply and demand, on the supply side, although precipitation has affected nickel ore transportation at major nickel ore loading points in the Philippines, with the southern main mining area entering the dry season, an increase in Philippine nickel ore supply is still expected. On the demand side, with downstream NPI tender prices hitting new lows and losses deepening, the sentiment for raw material procurement among domestic NPI smelters has been dampened, and the demand-side support for nickel ore prices has weakened.Looking ahead, the domestic transaction prices of nickel ore in the Philippines may be dragged down by downstream demand, operating under pressure.

For Indonesia's local laterite nickel ore: This week, the SMM Indonesia's local laterite nickel ore with 1.3% nickel content (delivery-to-factory price) was priced at $25.5-26.6/wmt, while the SMM Indonesia's local laterite nickel ore with 1.6% nickel content (delivery-to-factory price) was priced at $52.6-54.6/wmt.

Regarding the prices of ore used for pyrometallurgy, although the HPM price in May dropped slightly, the mainstream premium on Sulawesi Island was raised to $26-28/wmt in May, and the absolute price of ore used for pyrometallurgy still rose. For ore used for hydrometallurgy, affected by the decrease in the production schedule of Indonesia's MHP in April, downstream smelters attempted to push down the prices of ore used for hydrometallurgy. After the Labour Day holiday, the FOB price of NI1.3% ore used for hydrometallurgy was lowered to $17/wmt, a decrease of approximately $2/wmt. Looking ahead, although the rainy season in Sulawesi has shown signs of improvement, it is still ongoing. Meanwhile, Halmahera Island also entered the rainy season in May. Continuous rainfall has affected the shipments from mines, deepening the mines' willingness to stand firm on quotes. However, the raw material inventory of downstream smelters is insufficient, and there is strong demand for just-in-time procurement. Coupled with the decrease in the HPM benchmark price in May and the implementation of the PNBP policy starting from the end of April, the price of ore used for pyrometallurgy rose slightly. Downstream NPI enterprises are facing a dilemma, while the profit margins of hydrometallurgy enterprises may expand again in the short term.