Pyro Ore Prices in Indonesia Unlikely to Rise, Hydro Ore Prices May Rebound [SMM Nickel Morning Meeting Summary]

5.20 Morning Meeting Summary

Macro News:

(1) According to data from the National Bureau of Statistics, in April, the total retail sales of consumer goods reached 3,717.4 billion yuan, up 5.1% YoY. Excluding automobiles, the retail sales of consumer goods amounted to 3,354.8 billion yuan, up 5.6% YoY. From January to April, the total retail sales of consumer goods reached 16,184.5 billion yuan, up 4.7% YoY. Excluding automobiles, the retail sales of consumer goods amounted to 14,700.5 billion yuan, up 5.2% YoY.

(2) Recently, the US has successively reached trade agreements with the UK and China, significantly easing global trade tensions. However, uncertainties surrounding tariffs still linger. On Sunday local time, US Treasury Secretary Bessent warned that some of the US's trading partners may soon face another significant increase in tariff rates. In an interview with the media, Bessent stated that if countries do not engage in "good faith" negotiations and fail to reach trade agreements before the tariff moratorium expires in early July, tariff rates will soon revert to "Liberation Day" levels.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 123,850-126,150 yuan/mt, with an average price of 125,000 yuan/mt, a decrease of 1,125 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 2,000-2,200 yuan/mt, with an average premium of 2,100 yuan/mt, unchanged from the previous trading day. The premiums and discounts quotation range for Russian nickel is 100-300 yuan/mt, with an average premium of 200 yuan/mt, an increase of 50 yuan/mt from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2506) maintained a fluctuating trend during the daytime session. As of 11:30, the closing price was 124,100 yuan/mt, down 1.27%. In terms of inventory, as of May 16, LME nickel inventory decreased by 3,924 mt to 195,222 mt on a single-day basis, while domestic SHFE inventory decreased by 66 mt to 27,742 mt.

Currently, nickel prices are mainly influenced by "intensified policy disruptions and deepened supply-demand imbalance," maintaining a fluctuating pattern in the short term, with a support level at 122,000 yuan/mt and a resistance level at 128,000 yuan/mt. In the medium and long term, the trend is expected to be weak.

Nickel Sulphate:

On May 19, the SMM battery-grade nickel sulphate index price was 27,757 yuan/mt, with a quotation range for battery-grade nickel sulphate of 27,760-28,230 yuan/mt, and the average price remained stable compared to 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 provides strong cost support. Demand side, influenced by destocking at downstream material plants this month, the production schedule for some precursors has declined, weakening the procurement demand for nickel salts. Supply side, some nickel salt smelters lowered their quotation coefficients this week due to weak demand for precursors. Looking ahead, it is expected that nickel salt prices will remain stable this week, driven by weak supply and demand in the market, as well as cost support for nickel salts.

Nickel Pig Iron (NPI):

As of May 19, the average price of SMM 8-12% high-grade NPI was 944 yuan/mtu (ex-factory, tax included), up 2.5 yuan/mtu from the previous working day. Supply side, domestically, some smelters that had undergone maintenance have resumed production, with production climbing and driving a slight increase in overall output. In Indonesia, the domestic trade premiums for pyro ore remain relatively firm, and finished product prices have fallen below the cost line. Affected by losses, some high-cost production lines have reduced their production loads, and overall output is expected to decline slightly. Demand side, stainless steel prices have been supported by the easing of tariff policies, with prices stabilizing and rising. However, overall trading activity has not improved significantly. The price intentions of mainstream steel mills for raw material purchases have stabilized, and some traders have shown willingness to stockpile, with purchase prices rising slightly from the previous period. It is expected that high-grade NPI prices will stabilize and recover in the short term.

Stainless Steel:

As of May 19, SS futures contracts exhibited a weak and sluggish trend, ultimately closing with a doji K-line. Recently, as the impact of favourable macro front stimuli has gradually faded, market logic has returned to being dominated by supply and demand fundamentals. Spot prices have continued a slight downward trend, in stark contrast to the previous period. Last week, driven by favourable macro front news, SS futures prices rose first, and the spot market quickly followed suit, with downstream demand being concentratedly released in the early stages of the price increase. However, entering this week, demand has significantly weakened, and trading activity in the market has been particularly sluggish today. To promote sales, some traders have chosen to offer slight discounts, further pushing spot prices lower.

In the futures market, the most-traded 2507 contract is in the doldrums. At 10:30 a.m., SS2507 was quoted at 12,975 yuan/mt, down 20 yuan/mt from the previous trading day. In the Wuxi region, spot premiums/discounts for 304/2B stainless steel ranged from 345-545 yuan/mt. In the spot market, cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 8,100 yuan/mt; cold-rolled uncut edge 304/2B coils had an average price of 13,275 yuan/mt in Wuxi and 13,225 yuan/mt in Foshan; cold-rolled 316L/2B coils were priced at 23,875 yuan/mt in Wuxi and the same in Foshan; hot-rolled 316L/NO.1 coils were quoted at 23,100 yuan/mt in both regions; and cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

The influence of macro policy factors that frequently disrupted the market in the early stage has gradually weakened, and the market has returned to a logic dominated by supply and demand. Although stainless steel prices have reached lows in recent years and face resistance to further declines, the industry's high-supply pattern remains unchanged, with stainless steel production continuing to fluctuate at highs and social inventory remaining elevated. Coupled with the end of the traditional peak consumption season, weak downstream demand, intensified recent price fluctuations, and a strong wait-and-see sentiment in the market, traders are facing significant pressure to ship goods. Meanwhile, the prices of key raw materials such as high-grade NPI and high-carbon ferrochrome continue to weaken, resulting in insufficient cost support. If there are no new favourable macro front factors to boost the market in the future, under the pattern of high supply and weak demand, stainless steel prices may continue to remain in the doldrums.

Nickel Ore:

Philippine Nickel Ore Remains Generally Stable, with Slight Adjustments and Declines in CIF Prices for Medium-Grade Ores

Philippine nickel ore prices remained generally stable with slight declines last week. The CIF price of Philippine laterite nickel ore NI1.3% from the Philippines to China was $43.5-45/wmt, unchanged from the previous week. The FOB price of NI1.3% was $32-35/wmt, also unchanged from the previous week. The CIF price of NI1.5% was $58-59/wmt, down by $1/wmt, while the FOB price of NI1.5% was $47-50/wmt, unchanged from the previous week. In terms of supply and demand, on the supply side, although there was precipitation at major nickel ore loading points in the Philippines, with relatively heavy rainfall in areas such as Sta Cruz, Eastern Davao, and Tawi Tawi, the rainfall in the Surigao region decreased compared to previous weeks. Overall, after 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 losses, the sentiment of domestic NPI smelters towards raw material procurement has been dampened, and the support for nickel ore prices from the demand side continues to weaken. Regarding shipments from the Philippines to Indonesia, as of mid-May, the volume of nickel ore shipped from the Philippines to Indonesia exceeded 3 million wmt, representing a YoY increase of over 200%. The increase in Indonesia's imports of Philippine nickel ore has further strengthened the refusal of Philippine mines to budge on prices. Looking ahead, the domestic transaction prices of Philippine nickel ore may be dragged down by the downstream sector and operate under pressure, but the impact of the Indonesian side on Philippine ore prices is significant.

Indonesian Ore HPM Increases, but Pyro Ore Premiums Struggle to Rise Due to Fundamentals

The transaction prices of Indonesian ore increased slightly last week, mainly due to a slight increase in the HPM in the second half of May. For pyro ore, the mainstream premium for Indonesia's local ore in May remained at $26-28/wmt, unchanged from the previous week. The delivery-to-factory price of SMM Indonesia's local ore 1.6% was $53.3-57.3/wmt, up by $0.7/wmt or 1.28% WoW. For hydro ore, the transaction price remained unchanged during the week, with the delivery-to-factory price of SMM Indonesia's local ore 1.3% at $23-25/wmt.

Pyro Ore: On the supply side, weather disturbances to nickel ore supply still persist, with frequent rainfall in Sulawesi. Meanwhile, Halmahera also entered the rainy season in May, and frequent rainfall has affected the shipments of mines. On the demand side, NPI prices have stopped falling at low levels, and there is a strong wait-and-see sentiment. Based on current ore prices, both domestic and Indonesian NPI smelters are in a state of losses, with limited acceptance of high-priced nickel ore. Inventory side: After experiencing low inventory levels and ore-buying and stockpiling in April, the current inventory levels of Indonesian pyrometallurgy smelters have improved, and their willingness to buy ore at prices higher than the market rate has decreased. Overall, despite ongoing supply-side disruptions such as weather-related factors and the possibility that the progress of RKAB approvals may fall short of expectations, the current prices of Indonesia's local pyro ore in the domestic market are unlikely to see significant upward movement in the short term due to the drag from weak downstream prices.

Regarding hydro ore, affected by the reduction in MHP production schedules in Indonesia in April, downstream smelters have pushed down the prices of hydro ore. Transaction prices in the hydro ore market fell after the Labour Day holiday, while MHP profits remain favorable. SMM expects that with the gradual resumption of production at the MOROWALI Industrial Park's MHP projects in May and the construction of new hydro projects in the second half of the year (H2), hydro ore prices may rebound.