Nickel Ore Prices Remain High, Driving Up Costs Across the Nickel Industry Chain [[SMM] Nickel Morning Meeting Summary]

5.15 Nickel Morning Meeting Summary

Macro News:

(1) On May 13, the US Department of Labor released the April CPI data. The unadjusted year-on-year CPI growth rate was 2.3%, hitting a new low since February 2021 and falling below the expected 2.4%. The seasonally adjusted month-on-month CPI growth rate was 0.2%, also missing the expected 0.3%. In April, the unadjusted year-on-year core CPI growth rate in the US was 2.8%, in line with market expectations, maintaining the lowest level since March 2021. The month-on-month growth rate was 0.2%, lower than the market expectation of 0.3%.

(2) The State Taxation Administration uses VAT invoice data calculated at current prices to monitor the daily sales revenue of enterprises nationwide, reflecting the macroeconomic operation trend. The latest data shows that in April, the growth rate of nationwide enterprise sales revenue accelerated, with a year-on-year increase of 4.3%, continuing the steady growth trend since Q4 last year. This reflects the continuous release of the effects of a package of existing and incremental policies since the end of September last year, boosting the economic rebound.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 124,500-125,350 yuan/mt, with an average price of 124,925 yuan/mt, up 1,125 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan No.1 nickel is 2,100-2,200 yuan/mt, with an average premium of 2,150 yuan/mt, down 50 yuan/mt from the previous trading day. The premium and discount quotation range for Russian nickel is 100-300 yuan/mt, with an average premium of 200 yuan/mt, up 50 yuan/mt from the previous trading day.

Futures Market:

Today, non-ferrous metals generally rose. The most-traded SHFE nickel contract (NI2506) opened lower in the night session yesterday and then continued to rise. The daytime session maintained the upward trend, closing at 125,060 yuan/mt as of 11:30, with a gain of 0.67%.

Consensus has been reached on tariff issues in the China-US economic and trade talks, easing trade tensions. Currently, nickel ore prices remain high, and the shortage of supply in mining areas persists, driving up the costs of the nickel industry chain. However, under the supply surplus situation, cost transmission is hindered, and nickel prices may remain in the doldrums, with a support level at 122,000 yuan/mt and a resistance level at 128,000 yuan/mt. Subsequent attention should be paid to policy adjustments in Indonesia and changes in nickel ore supply after the end of the rainy season in the Philippines.

Nickel Sulphate:

On May 14, the SMM battery-grade nickel sulphate index price was 27,864 yuan/mt. The quotation range for battery-grade nickel sulphate was 27,860-28,370 yuan/mt, with the average price remaining stable WoW.

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, MHP cost support remains strong. Demand side, destocking by downstream material plants this month led to a decline in precursor production schedules, weakening the procurement demand for nickel salts. Supply side, some nickel salt smelters have low raw material inventory levels, with expectations for production cuts. Nickel salt smelters are not eager to sell, and the market circulation of nickel salts is relatively limited. Looking ahead, the nickel salt market is currently weak in both supply and demand, with a tug-of-war between buyers and sellers, and nickel salt prices are expected to remain stable.

NPI:

On May 14, the average price of SMM 8-12% high-grade NPI was 941.5 yuan/mtu (ex-factory, tax included), down 1 yuan/mtu from the previous working day. Supply side, domestically, some smelters that underwent maintenance earlier have resumed production, with production gradually increasing, but the overall production growth is limited due to intensified losses caused by declining finished product prices. In Indonesia, the current nickel ore premiums remain generally stable with a slight rise, providing strong cost support for smelters, but some production lines in certain regions have reduced load due to finished product prices falling below cost lines, and production is expected to decline slightly. Demand side, the continuous losses in stainless steel have led to a reduction in crude steel production by some steel mills, weakening the demand for high-grade NPI. The transaction prices in the high-grade NPI market have continued to weaken, and it will take time for macro policies to be transmitted to the industry, so high-grade NPI prices are expected to remain under pressure in the short term.

Stainless Steel:

On May 14, the US CPI data released last night became the market focus. The data showed that the indicator did not rise due to tariff policies but was lower than market expectations. This result provided support for the US Fed to cut interest rates as scheduled, driving the overall strength in the non-ferrous metals futures market. Among them, SS futures performed particularly well, breaking through the 13,000 yuan mark. Driven by the strong performance in the futures market, spot market quotations for stainless steel also rose. Some agents and traders suspended trading for 304 HRC products, further intensifying market tension. Driven by the psychology of "rushing to buy amid continuous price rise and holding back amid price downturn," the activity of low-priced sources increased significantly, and market trading heated up rapidly.

Futures side, the most-traded contract 2507 strengthened and rose. At 10:30 am, SS2507 was quoted at 13,050 yuan/mt, up 140 yuan/mt from the previous trading day. In Wuxi, the spot premiums/discounts for 304/2B were in the range of 270-420 yuan/mt. In the spot market, cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 8,050 yuan/mt; cold-rolled cut edge 304/2B coils averaged 13,225 yuan/mt in Wuxi and 13,200 yuan/mt in Foshan; cold-rolled 316L/2B coils in Wuxi were quoted at 23,850 yuan/mt, and in Foshan at 23,850 yuan/mt; hot-rolled 316L/NO.1 coils were quoted at 23,050 yuan/mt in both regions; cold-rolled 430/2B coils in Wuxi and Foshan were both quoted at 7,500 yuan/mt.

Recently, multiple favourable macro factors, including adjustments to China-US tariff policies and weaker-than-expected US CPI data, have injected strong momentum into the stainless steel futures market, driving futures prices to continue climbing. The easing of tariff policies has directly alleviated market concerns about export disruptions, while the weaker US CPI data has strengthened expectations for US Fed interest rate cuts, further boosting confidence in the commodity market. However, the market still faces numerous constraints: on the one hand, there is uncertainty regarding the final effectiveness and sustainability of the tariff policies; on the other hand, the supply volume in the stainless steel market remains at historically high levels, and the supply-demand imbalance has not yet been fundamentally alleviated. Meanwhile, as prices of raw materials such as high-grade NPI and high-carbon ferrochrome have weakened, the cost side's support for prices has somewhat diminished. Against this backdrop, the actual recovery of downstream end-use consumption will become a key variable determining the price trend of stainless steel, requiring continuous close attention.

Nickel Ore:

Philippine Nickel Ore: Today, 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, and 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.

Supply and demand side, in terms of supply, 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 Surigao has relatively decreased compared to the past few weeks. Overall, following the decrease in rainfall in Surigao, the supply of Philippine nickel ore is still expected to increase. In terms of demand, 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 frustrated, and the demand side's support for nickel ore prices continues to weaken. Looking ahead, the domestic transaction prices of Philippine nickel ore may be under pressure due to downstream constraints.

Indonesia's Local Laterite Nickel Ore: This week, SMM's Indonesia's local laterite nickel ore 1.3% (delivery-to-factory price) is $23-25/wmt, down $2/wmt WoW; SMM's 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: Supply side, this year's rainy season has lasted longer, and although rainfall in Sulawesi has improved, it is still continuing. Meanwhile, Halmahera Island also entered the rainy season in May, and frequent rainfall has affected the shipments from mines. Additionally, after the implementation of the PNBP policy, the sales costs of nickel ore have increased, leading to strong sentiment among mines to stand firm on quotes. Demand side, despite the continuous decline in NPI prices, the inventory of nickel ore at 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.