High-Nickel Pig Iron Prices Continue Downward Trend Amid Increased Supply and Weak Demand

This week, the average price of SMM 8-12% high-nickel pig iron is 950.1 RMB per nickel point (tax-included, ex-factory), which represents a decrease of 17.4 RMB per nickel point compared to the average price last week. The price of high-nickel pig iron continues its previous downward trend.

From the supply side, the domestic situation shows a significant increase in the volume of nickel ore arriving from the Philippines, leading to a substantial replenishment of raw material inventories for smelters. Additionally, some production lines that were previously under maintenance have resumed normal production, thus increasing the overall output. On the other hand, in Indonesia, the premium on nickel ore remains relatively stable, providing strong cost support for smelters. However, due to the continuous decline in product prices and expanded losses for smelters, some facilities have adjusted their production loads, and it is expected that the overall output may decrease.

On the demand side, mainstream stainless steel mills currently have ample raw material inventories, and stainless steel products are experiencing a period of cost inversion. As a result, steel mills have low intentions for purchasing raw materials and are offering lower procurement prices. It is expected that in the short term, the price of high-nickel pig iron will continue to face downward pressure.

Furthermore, this week, the average discount of high-nickel pig iron compared to electrolytic nickel is 291.88 RMB per nickel point, which is an expansion of 16.96 RMB per nickel point from last week, indicating further weakening of high-nickel pig iron prices. On the macro front, U.S. Federal Reserve Chairman Powell's remarks did not release sufficiently dovish signals, indicating that the Fed remains cautious on the issue of rate cuts. The market's expectations for a rate cut in 2025 remain at 78 basis points, slightly below the pre-meeting level of 80 basis points. This has resulted in a neutral trading sentiment for non-ferrous metals, with nickel prices oscillating within a range this week.

From a fundamental perspective, the nickel supply-demand balance remains in a state of surplus, which leads to a lack of upward momentum for nickel prices. The widened discount of high-nickel pig iron compared to electrolytic nickel mainly stems from the decline in high-nickel pig iron prices. In the short term, the price of high-nickel pig iron will continue to weaken under the negative feedback from the stainless steel market. From the perspective of pure nickel, although fundamentals are under pressure, the presence of macro uncertainties and cost support may result in nickel prices maintaining range-bound oscillations.

Next week, it is expected that the average discount of high-nickel pig iron compared to electrolytic nickel may continue to widen. From a cost perspective, based on the nickel ore prices calculated 25 days ago, the cash cost of high-nickel pig iron smelters has deepened the degree of cost inversion this week. On the raw material side, the prices of auxiliary materials remained stable this week, with iron water production still running at high levels and coke enterprises having high operating rates. The overall supply-demand contradiction for coke is not significant, providing strong price support. As a result, the cost line for auxiliary materials at high-nickel pig iron smelters remained stable this week.

From the mining perspective, 25 days ago, the rainy season in the Philippines had basically ended, leading to an increase in nickel ore shipments. In the context of tight supplies in Indonesia, Philippine nickel ore prices have been supported, with smelters' nickel ore cost lines maintaining stable operations. This week's deepening of cost inversion is primarily due to the rapid post-holiday decline in high-nickel pig iron prices. It is anticipated that next week, auxiliary material prices will continue to remain stable with downstream demand support. As for nickel ore, due to the short-term increase in demand providing price support, nickel ore prices are expected to remain stable to slightly strong. Therefore, it is inferred that the degree of loss for high-nickel pig iron smelters might further deepen next week.