Prices of Indonesian ore and ore used for pyrometallurgy rise again, with spot stainless steel showing willingness to explore price increases [SMM Nickel Morning Meeting Summary]

5.12 Nickel Morning Meeting Summary

Macro News:

(1) The high-level China-US economic and trade talks were held in Geneva, Switzerland, from May 10 to 11. He Lifeng, the Chinese head of the economic and trade delegation and Vice Premier of the State Council, stated at a press conference held by the Chinese delegation on the evening of May 11 local time that the talks were frank, in-depth, and constructive, with important consensus reached and substantive progress made. Both sides agreed to establish a China-US economic and trade consultation mechanism. China and the US will finalise the relevant details as soon as possible and release a joint statement on the talks on May 12.

(2) After Powell reiterated last week that the US Fed would adopt a wait-and-see approach towards easing monetary policy, traders significantly adjusted their bets, expecting the benchmark interest rate to fall by less than 75 basis points (≤three interest rate cuts) in 2025, with the first interest rate cut not expected to occur until July at the earliest. Fed Chairman Powell had previously stated that due to President Trump's across-the-board tariff hikes, the risks of rising inflation and unemployment had intensified while policymakers sought greater clarity on trade policies. Of course, whether this expectation holds true will depend on the performance of US economic and inflation data in the coming weeks. Details of the China-US trade negotiations over the weekend and the Consumer Price Index (CPI) released on Tuesday may still prompt investors to re-evaluate their latest views.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 125,900-128,550 yuan/mt, with an average price of 127,225 yuan/mt, up 2,400 yuan/mt from the previous trading day. The mainstream spot premium quotation for Jinchuan No.1 nickel is in the range of 2,000-2,300 yuan/mt, with an average premium of 2,150 yuan/mt, down 150 yuan/mt from the previous trading day. The premiums and discounts quotation for Russian nickel is in the range of 0-300 yuan/mt, with an average premium of 150 yuan/mt, unchanged from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2506) rebounded strongly, opening at 124,150 yuan/mt and closing at 125,930 yuan/mt as of 11:30, a gain of 1.84%. In terms of inventory, LME nickel inventory decreased by 642 mt to 197,670 mt on May 9, while domestic SHFE warrants decreased by 867 mt to 27,808 mt, with both SHFE and LME inventories experiencing destocking.

Base metal prices generally rose on Monday as news of substantive progress in the US-China trade negotiations emerged, alleviating concerns about a global recession to some extent. Another reason for nickel's outstanding performance was the rumor that the Philippines plans to implement a ban on nickel ore exports starting next month, which may lead to a shortage of nickel ore supply. However, SMM analysis suggests that the short-term impact on the nickel market may be more sentiment-driven, and the policy is unlikely to have a fundamental impact on the nickel industry in the short term.

Nickel sulphate:

On May 12, the SMM index price for battery-grade nickel sulphate was 27,863 yuan/mt, with a quotation range of 27,860-28,370 yuan/mt for battery-grade nickel sulphate. The average price remained stable WoW.

Cost side, the production of MHP in Indonesia in April was significantly impacted by floods, leading to a supply-demand gap and keeping its coefficient firm at highs. Overall, MHP costs provided strong support. Supply side, some nickel salt smelters had limited quantities available for external sale in the remaining days of May, resulting in firm quotations. Some nickel salt smelters, due to incomplete raw material stocking, had expectations for production cuts. Additionally, with raw material prices fluctuating at highs, this further supported firm pricing. Demand side, some precursor plants had relatively sufficient inventory, resulting in low procurement activity. However, some precursor plants still had procurement needs in May and were expected to start inquiring about prices this week. Looking ahead, based on fundamental factors such as tight raw material supply, stable cost support, and downstream demand dependence, nickel salt prices are expected to show a mild upward trend in the short term.

NPI:

As of May 12, the average price of SMM 8-12% high-grade NPI was 942.5 yuan/mtu (ex-factory, tax included), down 1.5 yuan/mtu from the previous working day. Supply side, domestically, some smelters that had undergone maintenance earlier began to resume production, with output gradually increasing. However, due to the intensified losses of smelters caused by the decline in finished product prices, the overall increase in production was relatively limited. In Indonesia, the current premium for Indonesian nickel ore remained generally stable with a slight rise, providing strong cost support for smelters. However, simultaneously affected by the decline in finished product prices that fell below the cost line, some production lines in certain regions had reduced their operating loads, and production was expected to decline slightly. Demand side, due to the continuous losses in stainless steel earlier, some steel mills reduced their crude steel output, leading to weaker demand for high-grade NPI. Additionally, the economic advantage of stainless steel scrap still existed, and the transaction prices in the high-grade NPI market continued to weaken. It is expected that high-grade NPI prices will remain under pressure in the short term.

Stainless steel:

As of May 12, according to SMM, today, consensus was reached at the high-level economic and trade talks between China and the US, and the hefty tariffs imposed by the US on China earlier were temporarily lifted. The SS futures market strengthened and rose as a result. Stainless steel spot prices had already shown signs of a rebound, and in the morning, driven by positive news from the China-US negotiations and the increase in stainless steel mills' spot prices, spot quotations strengthened and rose. Market pessimism dissipated somewhat, and coupled with the fact that stainless steel spot prices were already at low levels, market transactions improved today.

In terms of futures, the most-traded contract completed its rollover to the 2507 contract today. At 10:30 a.m., SS2506 was quoted at 12,870 yuan/mt, up 160 yuan/mt from the previous trading day.In the Wuxi region, the spot premiums/discounts for 304/2B stainless steel range from 350 to 500 yuan/mt. In the spot market, the cold-rolled 201/2B coils in both Wuxi and Foshan are quoted at 8,050 yuan/mt. The average price for cold-rolled cut edge 304/2B coils is 13,125 yuan/mt in Wuxi and the same in Foshan. The price for cold-rolled 316L/2B coils is 23,850 yuan/mt in Wuxi and the same in Foshan. For hot-rolled 316L/NO.1 coils, the price is uniformly quoted at 23,050 yuan/mt in both regions. The cold-rolled 430/2B coils are priced at 7,500 yuan/mt in both Wuxi and Foshan.

Currently, China and the US are witnessing significant adjustments to their tariff policies: 91% of the previously imposed tariffs will be removed. Among the 34% reciprocal tariffs, a 90-day suspension will be applied to 24%, with only 10% remaining. This outcome significantly surpasses the market's earlier expectation of retaining 40-60% tariffs, providing a boost to the stainless steel futures market and driving futures prices higher. However, uncertainties in policy remain, coupled with the stainless steel market's supply continuing to hover at historically high levels and cost support weakening compared to the previous period, the market still faces multiple pressures. The subsequent price trend of stainless steel will still need to closely monitor the actual recovery of downstream end-use consumption.

Nickel Ore:

Philippine nickel ore prices drop slightly, but recovery of downstream profits remains distant

This week, Philippine nickel ore prices have slightly declined due to the loosening of offer prices from Philippine mines. The CIF price of Philippine laterite nickel ore (NI1.3%) from the Philippines to China is 43.5-45 US dollars per wet metric ton (wmt), down by 0.25 US dollars/wmt. The FOB price for NI1.3% is 32-35 US dollars/wmt, down by 1.5 US dollars/wmt. The CIF price for NI1.5% is 59-60 US dollars/wmt, down by 1 US dollar/wmt, and the FOB price for NI1.5% is 47-50 US dollars/wmt, down by 2.5 US dollars/wmt. In terms of supply and demand, on the supply side, although there has been precipitation at major nickel ore loading points in the Philippines, affecting nickel ore transportation, with the southern main mining area entering the dry season, the supply of Philippine nickel ore is still expected to increase. On the demand side, with downstream NPI tender prices hitting new lows and the deepening of losses, the sentiment for raw material purchases among domestic NPI smelters has been dampened, weakening the demand-side support for nickel ore prices. Regarding ocean freight rates, they have remained stable overall during the week, with the rate from Surigao to Lianyungang, China, being approximately 10-11 US dollars/wmt. In terms of exports from the Philippines to Indonesia, the export volume from the Philippines to Indonesia continues to increase. Indonesian nickel ore prices have generally strengthened this month, and there has been an increase in external purchases of Philippine ore by Indonesia, providing some support to Philippine nickel ore prices. Overall, the domestic transaction prices of Philippine nickel ore may be dragged down by the downstream sector, operating under pressure.

Prices of Indonesian ore used for pyrometallurgy rise again, with prices of ore used for hydrometallurgy and ore used for pyrometallurgy diverging

This week, prices of Indonesian ore edged higher. For ore used for pyrometallurgy, the mainstream premium for Indonesia's local ore in May ranged from $26 to $30/wmt. The delivery-to-factory price of 1.6% Indonesia's local ore, as tracked by SMM, was between $52.6 and $56.6/wmt, up $1/wmt or 1.87% from last week. For ore used for hydrometallurgy, market prices fell. The delivery-to-factory price of 1.3% Indonesia's local ore, as tracked by SMM, was between $23 and $25/wmt, down $2 or 7.69%.

For ore used for pyrometallurgy: Supply side, the rainy season has lasted longer this year. Although rainfall in Sulawesi has improved, it is still ongoing. Meanwhile, Halmahera also entered the rainy season in May. Frequent rainfall has affected the shipments available from mines. Additionally, after the implementation of the PNBP policy, the sales cost of nickel ore has increased, leading to strong sentiment among mines to stand firm on quotes. On the buyer side, NPI prices have continued to decline, but the nickel ore inventory of downstream smelters remains relatively low, and there is still demand for just-in-time procurement. Coupled with market concerns about the approval of subsequent supplementary quotas for RKAB, the sentiment for nickel ore procurement remains high. After the price increase, downstream NPI enterprises are facing difficulties.

For ore used for hydrometallurgy, affected by the reduction in MHP production schedules in Indonesia in April, downstream smelters attempted to push down the prices of ore used for hydrometallurgy. After the Labour Day holiday, the market transaction price of ore used for hydrometallurgy fell, while MHP profits remained favorable. SMM expects that with the gradual resumption of production of MHP projects in the MOROWALI Industrial Park in May and the construction of new hydrometallurgy projects in H2, the prices of ore used for hydrometallurgy may rebound.