Stainless steel spot prices remain firm; ore prices for hydrometallurgy in Indonesia may be more likely to rise than fall in the future [SMM Nickel Morning Meeting Summary]

5.16 Nickel Morning Meeting Summary

Macro News:

(1) According to the People's Bank of China, preliminary statistics showed that as of the end of April 2025, the outstanding social financing scale was 424.0 trillion yuan, up 8.7% YoY. The balance of broad money (M2) was 325.17 trillion yuan, up 8% YoY. The balance of narrow money (M1) was 109.14 trillion yuan, up 1.5% YoY. The balance of currency in circulation (M0) was 13.14 trillion yuan, up 12% YoY.

(2) As China and the US implemented a series of tariff adjustment measures, US importers significantly increased their import orders from China this week. Data from multiple shipping companies and industry trackers showed that China's cargo volume to the US has rebounded significantly. On Wednesday, Eastern Time, Vizion, a container tracking data software provider, stated that after China and the US reached a trade "truce," the average booking volume for container shipments from China to the US surged by 277% to 21,530 twenty-foot equivalent units (TEUs), compared to the seven-day average booking volume of 5,709 TEUs as of last Monday (May 5).

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price was 125,100-127,550 yuan/mt, with an average price of 126,325 yuan/mt, up 250 yuan/mt from the previous trading day. The quotation range for the mainstream spot premiums of Jinchuan No.1 nickel was 2,000-2,200 yuan/mt, with an average premium of 2,100 yuan/mt, down 50 yuan/mt from the previous trading day. The premiums and discounts quotation range for Russian nickel was 0-300 yuan/mt, with an average premium of 150 yuan/mt, down 50 yuan/mt from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2506) edged higher slightly in the night session yesterday before gradually falling. The weakening trend continued in the daytime session, with the price decline accelerating during the morning close. As of 11:30, the closing price was 124,450 yuan/mt, up 0.04%.

Consensus was reached on tariff issues during 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 costs across 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 15, the SMM battery-grade nickel sulphate index price was 27,753 yuan/mt. The quotation range for battery-grade nickel sulphate was 27,760-28,230 yuan/mt, with the average price falling slightly from yesterday.

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 costs provide strong support. Demand side, influenced by destocking at downstream material plants this month, the production schedule of some precursors has declined, weakening the procurement demand for nickel salts. Supply side, some nickel salt smelters reduced their quotation coefficients this week due to weak demand for precursors. Looking ahead, with both supply and demand in the nickel salt market currently weak, and a tug-of-war between sellers and buyers, nickel salt prices are expected to decline.

Nickel Pig Iron (NPI):

On May 15, the average price of SMM 8-12% high-grade NPI was 941.5 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 output gradually increasing. However, due to falling finished product prices exacerbating smelter losses, the overall increase in production has been limited. In Indonesia, the current premium for Indonesian nickel ore remains generally stable with a slight rise, providing strong cost support for smelters. However, influenced by falling finished product prices that have breached 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 sustained losses in stainless steel production earlier, some steel mills have reduced their crude steel output, weakening the demand for high-grade NPI. Transaction prices in the high-grade NPI market have continued to decline. Additionally, it will take time for macroeconomic policies to translate into industry impacts, and high-grade NPI prices are expected to remain under pressure in the short term.

Stainless Steel:

On May 15, SMM reported that although SS futures contracts fluctuated downward today, the previous strong price increase had pushed the price above the 13,100 yuan threshold, so today's correction did not spill over into the spot market, with stainless steel spot prices remaining firm. Benefiting from the previous price increase, transaction activity in the spot market has significantly improved. SMM data released on the same day showed that social inventory of stainless steel declined by 0.85% WoW this week, confirming the market's destocking trend. However, the current high level of market transactions is mainly attributed to the price increase driven by favourable macro front earlier, which has concentrated the release of previously suppressed demand. The market generally worries that after short-term concentrated procurement, there is still significant uncertainty regarding the sustainability of downstream stainless steel consumption.

In the futures market, the most-traded 2507 contract strengthened and rose. At 10:30 a.m., SS2507 was quoted at 13,050 yuan/mt, up 140 yuan/mt from the previous trading day. Spot premiums/discounts for 304/2B in Wuxi ranged from 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 had an average price of 13,225 yuan/mt in Wuxi and 13,200 yuan/mt in Foshan; cold-rolled 316L/2B coils were priced at 23,850 yuan/mt in Wuxi and the same in Foshan; hot-rolled 316L/NO.1 coils were quoted at 23,050 yuan/mt in both regions; cold-rolled 430/2B coils were priced at 7,500 yuan/mt in both Wuxi and Foshan.

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 weak 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 has remained at historically high levels, and the supply-demand imbalance has not 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 end-use consumption in the downstream sector will become a key variable determining the price trend of stainless steel, requiring continuous close attention.

Nickel Ore:

This week, the mainstream premium for Indonesia's local laterite nickel ore remained at $26-30/wmt. In terms of ore used for pyrometallurgy prices, the SMM delivery-to-factory price for Indonesia's local laterite nickel ore with 1.6% nickel content was $52.6-56.6/wmt, up $1 from last week, representing an increase of approximately 1.87% YoY. For ore used for hydrometallurgy prices, the SMM delivery-to-factory price for Indonesia's local laterite nickel ore with 1.3% nickel content was lowered to $23-25/wmt, down $2 YoY, a decrease of 7.69%.

For ore used for pyrometallurgy, supply from Sulawesi Island continues to be disrupted by persistent rainfall. Additionally, Halmahera Island entered the rainy season starting in May. Overall, nickel ore supply in Indonesia remains relatively tight due to weather impacts. Furthermore, the PNBP policy has officially been implemented, leading to an increase in nickel ore sales costs. In addition, some Indonesian mines have had their mining activities under IUP permits restricted due to not yet obtaining RKAB quotas, further exacerbating the tight supply situation. On the demand side, NPI prices have continued to decline, causing Indonesian pyrometallurgy smelters' costs to be breached, limiting their acceptance of further nickel ore price increases. Overall, nickel ore prices in Indonesia are currently influenced by a mix of bullish and bearish factors. Although there are many disruptive factors on the supply side, prices may struggle to see significant increases in the short term due to downward pressure from the downstream sector.

For ore used for hydrometallurgy, there has been no significant tightening on the supply side so far. However, the MHP project accident in the MOROWALI Industrial Park affected MHP production in April, leading to a decrease in the local demand for ore used for hydrometallurgy in Indonesia. Consequently, ore used for hydrometallurgy prices have weakened. The relevant production lines in the park are expected to resume production gradually in May. SMM expects that ore used for hydrometallurgy prices may be more likely to rise than fall in the future.