Mine-side prices ease, SHFE nickel drops back slightly [SHFE nickel closing comment]

After the announcement of the Philippines' nickel ore ban and tariff negotiation news, nickel prices returned to mediocre levels. SHFE nickel opened lower and continued to decline during the night session, and maintained sideways movement in the day session today. The most-traded contract closed down 1.52% at 123,860 yuan/mt. Currently, the undervaluation of nickel prices, coupled with strong cost support, limits the downside room. However, it faces pressure from medium and long-term industrial surplus above, and nickel prices continue to fluctuate rangebound.

The nickel ore market is relatively quiet, with miners maintaining a firm stance on quotes. Some mines are already negotiating resources for June. Affected by the decline in nickel pig iron (NPI) prices, nickel ore prices have undergone a slight correction, with 1.4% nickel ore FOB prices dropping to around 40. The Surigao mining area in the Philippines is still affected by rainfall, hindering shipment loading and dispatch. Given the losses in steel mill profits downstream, some iron plants may not rule out taking production cuts to mitigate losses, maintaining a mindset of driving down prices for nickel ore raw material purchases. In Indonesia, both large K and small K areas are experiencing rainy weather, and the shortage of nickel ore supply persists. The domestic trade premium for nickel ore in May (Phase II) remains unchanged at 26-27, while the base price for domestic trade in May (Phase II) has increased by 0.65-1 US dollar, with an overall slight rise in prices.

On the demand side, stainless steel performance is weak. Against the backdrop of steel mill losses, there have been production cuts, but the magnitude may not be sufficient to reverse supply and demand dynamics, potentially exacerbating the degree of NPI surplus. In May, production schedules for 300-series stainless steel and NPI have declined, which may exert downward pressure on nickel ore prices. Currently, due to weather conditions, nickel ore production and shipments have been affected. After subsequent weather improvements, the premium for Indonesian nickel ore may peak. In the new energy sector, affected by the Sino-US trade dispute in April, export orders for ternary cathode material were robust. However, after entering May, the increase in orders has been difficult to sustain. Refined nickel production slightly decreased in April and is expected to recover in May, but as demand gradually enters the off-season, the surplus pattern of refined nickel persists.

Regarding the future market outlook, HunDun TianCheng Futures commented that since the tariffs on nickel and downstream industrial products such as stainless steel are not directly included in the reciprocal tariff, the easing of Sino-US tariffs has limited direct benefits for nickel. The downstream demand side, due to the fact that front-loading of exports has already occurred, will still face pressure from demand that has been brought forward, even if tariffs are eased subsequently. Therefore, the main driver of nickel prices still lies in fundamentals, with limited rebound space under surplus pressure. Subsequent attention should be paid to the direction of Indonesia's industrial policies, local nickel ore prices, and the trend of the macro environment.