Favorable Sino-US Tariff Policies Implemented, Limited Impact of Philippines' Rumored Mining Ban on Nickel Prices [SMM Nickel Morning Meeting Summary]

5.13 Nickel Morning Meeting Summary

Macro News:

(1) A spokesperson from the Ministry of Commerce (MOFCOM) made a statement regarding the joint statement on the Sino-US Geneva Economic and Trade Talks. MOFCOM stated that substantial progress was achieved in the high-level Sino-US economic and trade talks, with a significant reduction in bilateral tariff levels. The US side cancelled a total of 91% of the tariff hikes, and China correspondingly cancelled 91% of its retaliatory tariffs. The US side also suspended the implementation of 24% of the "reciprocal tariffs," and China correspondingly suspended the implementation of 24% of its retaliatory tariffs.

(2) Following the joint statement released by China and the US on Monday to ease trade tensions, major Wall Street banks and traders in the interest rate market have reduced their bets on the US Fed's interest rate cuts within the year. Currently, they are only pricing in two interest rate cuts for 2025, with a significant delay in the expected timing of the next cut. The latest interest rate swap contracts tracking expectations for the US Fed's meetings indicate that the Fed may only cut interest rates by about 55 basis points this year, a further significant decline from the 75 basis points bet on last Friday. Traders also expect the first interest rate cut to occur in September.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 123,550-126,350 yuan/mt, with an average price of 124,950 yuan/mt, a decrease of 2,275 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan No.1 nickel is 2,100-2,300 yuan/mt, with an average premium of 2,200 yuan/mt, an increase of 50 yuan/mt from the previous trading day. The premiums and discounts quotation range for Russian nickel is 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) opened lower in the night session yesterday and continued to decline, with the daytime session extending the slow decline trend and prices continuously dropping, returning to the level before Monday's rally. As of the 11:30 closing, the price was 123,230 yuan/mt, a decline of 2.02%.

Today, nickel prices have pulled back to last week's levels. The positive developments regarding tariff issues between China and the US have been priced in, and the impact of rumors about a ban on mining in the Philippines on nickel prices is limited. Currently, nickel prices are still constrained by the surplus situation, and subsequent attention should be paid to the driving effect of the reduction in Sino-US tariffs on downstream demand.

Nickel Sulphate:

On May 13, the SMM battery-grade nickel sulphate index price was 27,864 yuan/mt, with a quotation range for battery-grade nickel sulphate of 27,860-28,370 yuan/mt, and the average price remained stable compared to last week.

Cost side, the production of MHP in Indonesia in April was significantly affected by floods, resulting in a supply-demand gap and keeping its coefficient at a high level. Overall, the cost support for MHP is strong. Demand side, influenced by destocking at downstream material plants this month, the production schedule for some precursors has declined, leading to a weaker demand for nickel salt purchases. Supply side, some nickel salt smelters have low raw material inventory levels, with expectations for production cuts. Nickel salt smelters are not enthusiastic about shipping. The market circulation of nickel salt is also relatively limited. Looking ahead, the current nickel salt market is characterized by weak supply and demand, with a tug-of-war between sellers and buyers. It is expected that nickel salt prices will remain stable.

Nickel Pig Iron (NPI):

On May 13, the average price of SMM 8-12% high-grade NPI was 942.5 yuan/mtu (ex-factory, tax included), unchanged from the previous working day. Supply side, domestically, some smelters that underwent maintenance earlier have resumed production, with production gradually increasing. However, due to the decline in finished product prices exacerbating smelter losses, the overall production increase has been limited. In Indonesia, the current premium for Indonesian nickel ore is generally stable with a slight rise, providing strong cost support for smelters. However, influenced by the decline in finished product prices falling below the cost line, some production lines in certain regions have reduced their operating rates, and production is expected to decline slightly. Demand side, due to the continuous losses in stainless steel production earlier, some steel mills have reduced their crude steel output, leading to a weaker demand for high-grade NPI. Additionally, the economic advantage of stainless steel scrap still exists, causing the transaction prices in the high-grade NPI market to decline continuously. Furthermore, it will take time for macroeconomic policies to be transmitted to the industry, so it is expected that high-grade NPI prices will remain under pressure in the short term.

Stainless Steel:

On May 13, SMM reported that amidst the positive impact of the easing of Sino-US tariff policies, the SS futures futures market price stabilized above 12,900 yuan/mt today, but overall, it showed volatile movements, facing resistance in further upward exploration. Spot prices were also driven to hold up well, but the increase has slowed compared to yesterday. Following yesterday's price increase, the purchasing demand that had been suppressed by pessimistic wait-and-see sentiment in the market was released, with transactions significantly improving. Today, transactions have somewhat cooled down but are still better than before.

In the futures market, the most-traded 2507 contract showed volatile movements. At 10:30 a.m., SS2506 was reported at 12,910 yuan/mt, up 160 yuan/mt from the previous trading day. In the Wuxi region, the spot premiums/discounts for 304/2B were in the range of 350-500 yuan/mt. In the spot market, the cold-rolled 201/2B coils in Wuxi and Foshan were both reported at 8,050 yuan/mt; the cold-rolled cut edge 304/2B coils had an average price of 13,175 yuan/mt in Wuxi and 13,150 yuan/mt in Foshan; the cold-rolled 316L/2B coils were priced at 23,850 yuan/mt in Wuxi and the same in Foshan; the hot-rolled 316L/NO.1 coils were both reported at 23,050 yuan/mt in the two regions; the cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

Currently, significant adjustments have been made to Sino-US tariff policies: the 91% tariffs imposed earlier will be removed, and among the 34% reciprocal tariffs, a 90-day suspension will be applied to 24%, with only 10% remaining. This outcome significantly outperformed the market's earlier widespread expectation of "retaining tariffs at 40-60%," injecting a strong boost into the stainless steel futures market and driving futures prices higher with the potential for further upside. However, uncertainties at the policy level persist. Coupled with the stainless steel market's supply remaining at historically high levels and the weakening of cost support compared to the previous period, the market still faces multiple pressures. The subsequent trend in stainless steel prices will still need to closely monitor the actual recovery of downstream end-user consumption.

Nickel Ore:

SMM News on May 13:

Philippine Nickel Ore: Today, the prices of Philippine laterite nickel ore remained stable, with transaction prices continuing at the level after a slight drop from last week. Today, the NI1.3% CIF price of Philippine laterite nickel ore is $43.5~45/wmt, down $0.25/wmt; the NI1.3% FOB price is $32~35/wmt, down $1.5/wmt; the NI1.5% CIF price is $59~60/wmt, down $1/wmt; and the NI1.5% FOB price is $47~50/wmt, down $2.5/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, with heavier rainfall in areas such as Sta Cruz, Eastern Davao, and Tawi Tawi, the rainfall in the Surigao region has relatively decreased compared to the past few weeks. Overall, following the reduction in rainfall in Surigao, the supply of Philippine nickel ore is still expected to increase. On the demand side, with the continuous decline in downstream NPI prices and the deepening of the inversion margin, the sentiment for raw material procurement among domestic NPI smelters has been dampened, and the support for nickel ore prices from the demand side continues to weaken. Looking ahead, the domestic transaction prices of Philippine nickel ore may be dragged down by the downstream sector and operate under pressure.

Indonesia's Local Laterite Nickel Ore: This week, the SMM Indonesia's local laterite nickel ore 1.3% (delivery-to-factory price) is $23~25/wmt, down $2/wmt WoW; the SMM Indonesia's local laterite nickel ore 1.6% (delivery-to-factory price) is $52.6~56.6/wmt, up $1/wmt WoW.

Ore Used for Pyrometallurgy: On the supply side, the rainy season has lasted longer this year. Although the rainfall in Sulawesi has improved, it is still continuing, and 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 costs of nickel ore have increased, leading to a strong sentiment among mines to stand firm on quotes. On the demand side, although NPI prices continue to decline, 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 faced difficulties.

Regarding 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 prices of ore used for hydrometallurgy fell, while MHP profits remained favorable. SMM predicts that with the gradual production resumptions 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.