Activity in stainless steel spot cargo transactions declines; nickel salt prices may rise [SMM Nickel Morning Meeting Summary]

5.21 Morning Meeting Summary

Macro News:

(1) Atlanta Fed President Bostic reiterated his preference for only one interest rate cut this year; New York Fed President Williams stated that recent economic data has been very positive, with the key word for the economy being uncertainty; Fed Vice Chair Jefferson said that Moody's downgrade of the US rating would be treated as general data for policy formulation; Dallas Fed President Logan suggested that the Fed should consider strengthening mechanisms to more effectively prevent money market interest rates from surging during market stress.

According to the CME's "FedWatch Tool," the probability of the Fed maintaining interest rates unchanged in June is 91.6%, with only an 8.64% probability of a 25-basis-point rate cut; the probability of the Fed maintaining interest rates unchanged in July is 65.1%, with a 32.5% probability of a cumulative 25-basis-point rate cut and a 2.4% probability of a cumulative 50-basis-point rate cut.

(2) Putin stated that Russia is ready to cooperate with Ukraine on a memorandum for peace talks. Trump indicated that Russia and Ukraine would immediately commence negotiations to achieve a ceasefire. Zelenskyy expressed willingness to sign a memorandum with Russia for a ceasefire, in line with Putin's statement. The Kremlin stated that the leaders of Russia and the US intend to arrange a face-to-face meeting in the future, without setting a timetable for a ceasefire between Russia and Ukraine.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 123,350-125,800 yuan/mt, with an average price of 124,575 yuan/mt, a decrease of 425 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 2,000-2,300 yuan/mt, with an average premium of 2,150 yuan/mt, an increase of 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, unchanged from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2506) maintained a fluctuating trend after opening lower in the night session yesterday, closing at 123,400 yuan/mt as of 11:30, a decrease of 0.40%. In terms of inventory, as of May 16, LME nickel inventory decreased by 3,924 mt to 195,222 mt, while domestic SHFE inventory decreased by 66 mt to 27,742 mt.

Currently, nickel prices are primarily influenced by "intensified policy disruptions and deepening 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; the medium and long-term trend is weak.

Nickel Sulphate:

On May 20, the SMM battery-grade nickel sulphate index price was 27,768 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, in April, the production of MHP in Indonesia was significantly impacted by floods, leading to a supply-demand gap and keeping its coefficient at a high level. Overall, MHP had strong cost support. Demand side, in April, influenced by destocking at downstream material plants, the production schedule of some precursors declined, weakening the procurement demand for nickel salts. Supply side, amid the tug-of-war between buyers and sellers, nickel salt smelters are currently maintaining stable quotes. Looking ahead, next week is a traditional procurement period. Given the expected improvement in market demand in June and the cost support for nickel salts, nickel salt prices are expected to strengthen next week.

Nickel Pig Iron (NPI):

As of May 20, the average price of SMM 8-12% high-grade NPI was 946 yuan/mtu (ex-factory, tax included), up 2 yuan/mtu from the previous working day. Supply side, domestically, some smelters that underwent maintenance have resumed production, with production climbing and driving a slight increase in overall output. In Indonesia, the current domestic trade premiums for saprolite ore remain firm, and finished product prices have fallen below the cost line. Some high-cost production lines have been affected by losses, leading to a reduction in production load. Overall production is expected to decline slightly. Demand side, stainless steel prices have been boosted by the easing of tariff policies, with prices stabilizing and rising. However, overall transaction volumes have not improved significantly. Mainstream steel mills' intended procurement prices for raw materials have stabilized, and some traders have shown willingness to stock up, with purchase prices rising slightly from the previous period. Overall, it is expected that high-grade NPI prices will stabilize in the short term.

Stainless Steel:

As of May 20, the domestic Loan Prime Rate (LPR) saw its first cut of the year, with a reduction of 10 basis points. However, this positive development did not boost the SS futures market; instead, the futures market showed a downward trend. The spot market also faced significant pressure, with the pullback in futures prices heightening market caution. Since last Friday, market trading activity has declined significantly, increasing sales pressure on traders. According to feedback from some traders, sales in May have been poor, with some companies only completing their April shipment tasks last week. As month-end approaches and the cargo pick-up period for May orders nears, traders are adopting a profit-concession strategy to boost shipments and alleviate sales pressure.

In the futures market, the most-traded SS2507 contract declined. At 10:30 a.m., SS2507 was quoted at 12,860 yuan/mt, down 115 yuan/mt from the previous trading day. In the Wuxi region, the spot premiums/discounts for 304/2B stainless steel ranged from 360-610 yuan/mt. In the spot market, the cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 8,100 yuan/mt; the cold-rolled uncut edge 304/2B coils had an average price of 13,175 yuan/mt in Wuxi and 13,175 yuan/mt in Foshan; the cold-rolled 316L/2B coils were priced at 23,875 yuan/mt in Wuxi and 23,875 yuan/mt in Foshan; the hot-rolled 316L/NO.1 coils were quoted at 23,100 yuan/mt in both regions; and the cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

The influence of macroeconomic policy factors, which 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 already hit a low 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. Additionally, with the end of the traditional peak consumption season, downstream demand is weak. Coupled with recent intensified price fluctuations, the market is filled with wait-and-see sentiment, and traders are under significant pressure to sell. Meanwhile, the prices of key raw materials such as high-grade NPI and high-carbon ferrochrome continue to weaken, providing insufficient cost support. If there are no new favourable macro front factors to boost the market, 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 a Slight Decline in CIF Prices for Medium-Grade Ores

Philippine nickel ore prices remained generally stable with a slight decline last week. The CIF price of Philippine laterite nickel ore (NI1.3%) shipped to China was $43.5-45/wmt, unchanged WoW, and the FOB price was $32-35/wmt, also unchanged WoW. The CIF price of NI1.5% was $58-59/wmt, down $1/wmt, while the FOB price was $47-50/wmt, unchanged WoW. 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 Surigao decreased compared to previous weeks. Overall, after the decrease in rainfall in Surigao, Philippine nickel ore supply is still expected to increase. On the demand side, with the continuous decline in downstream NPI prices and a deepening loss, 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, up over 200% MoM from the same period last year. The increase in Indonesia's imports of Philippine nickel ore has further strengthened the refusal to budge on prices among Philippine mines. Looking ahead, the domestic transaction prices of Philippine nickel ore may be dragged down by the downstream sector and operate under pressure, but the influence of the Indonesian side on Philippine ore prices is significant.

Indonesia's HPM for Nickel Ore Increases, but Pyrometallurgy Ore Premiums Struggle to Rise Due to Fundamentals

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

For saprolite ore: On the supply side, weather continued to disrupt nickel ore supply, with frequent rainfall in Sulawesi and the onset of the rainy season in Halmahera in May. The frequent rainfall affected the shipments available from mines. On the buyer side, NPI prices stopped falling at low levels, and there was a strong wait-and-see sentiment. Based on current ore prices, both domestic and Indonesian NPI smelters were experiencing losses, limiting their acceptance of high-priced nickel ore. In terms of inventory: After experiencing low inventory levels and ore-buying stockpiling in April, the current inventory levels of Indonesian pyrometallurgy smelters have improved, and their willingness to buy ore at prices above the market rate has decreased. Overall, despite ongoing supply-side disruptions due to weather and the potential delay in RKAB approval progress, the current prices of Indonesia's local pyrometallurgy ore are unlikely to see significant upward movement in the short term due to the drag of weak downstream prices.

For limonite ore, affected by the reduction in MHP production schedules in Indonesia in April, downstream smelters pushed down the prices of limonite ore. After the Labour Day holiday, the market transaction price of limonite ore fell, while MHP profits remained favorable. SMM expects that with the gradual production resumptions of MHP projects in the MOROWALI Industrial Park in May and the construction of new limonite projects in H2, limonite ore prices may rebound.