Stainless steel prices hit a recent low, while high-grade NPI prices stopped falling and began to rebound [SMM Nickel Morning Meeting Summary]

5.22 Morning Meeting Summary

Macro News:

(1) Huang Qifan, academic advisor to the China Finance 40 Forum and former mayor of Chongqing, stated that after more than a decade of development, a significant number of products in China's top ten manufacturing sectors have achieved global leadership or are on par with developed countries. The situation where China's manufacturing was "large but not strong," dominated by mid-to-low-end products, has transformed into being "large and relatively strong" or "large and strong." From the formulation of the "15th Five-Year Plan" in 2025 to its full implementation from 2026 to 2030, and then to the long-term development goals for 2040, the central government has proposed a clear direction for the development of China's manufacturing sector: promoting the development of new quality productive forces. New quality productive forces will become the most powerful driving force for the development of China's manufacturing sector in the "15th Five-Year Plan" and even in the long-term plan for 2040.

(2) On May 20, the National Development and Reform Commission (NDRC) held its May press conference. Li Chao, Deputy Director of the Policy Research Office of the NDRC and spokesperson for the Commission, stated that currently, China's economy is in a period of replacing old growth drivers with new ones, with new industries, business formats, and models emerging in competition, and traditional industries accelerating their transformation and upgrading. In this process, some industries have indeed encountered structural issues, with some blindly following investment trends and others failing to keep up with the pace of technological updates and iterations. Some enterprises have become embroiled in "cut-throat competition," with some selling at low, ultra-low, or even below-cost prices, and some engaging in counterfeiting, selling shoddy goods, and passing off inferior products as high-quality ones. These practices have breached the boundaries and bottom lines of market competition, distorted market mechanisms, and disrupted the order of fair competition, necessitating rectification.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 123,400-125,650 yuan/mt, with an average price of 124,525 yuan/mt, a decrease of 50 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, a decrease 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) opened slightly lower in the morning session and then maintained a fluctuating trend. As of 11:30, the closing price was 123,120 yuan/mt, down 0.23%. In terms of inventory, as of May 20, LME nickel inventory increased by 90 mt to 202,098 mt on a single-day basis.

Currently, nickel prices are mainly influenced by "intensified policy disturbances 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 21, the SMM index price for battery-grade nickel sulphate was 27,768 yuan/mt, with a quotation range of 27,760-28,270 yuan/mt for battery-grade nickel sulphate, and the average price rose slightly compared to the previous day.

Cost side, LME nickel returned to fundamentals, showing a weak performance, leading to a slight decline in the production costs of nickel salt smelters. Demand side, the overall demand for nickel salt in June is expected to strengthen. Recently, precursor plants have significantly increased their inquiries about nickel salt, and purchase willingness has increased. Supply side, some nickel salt smelters maintained stable quotations, while others raised their quotation coefficients due to increased demand and limited raw material inventory. Looking ahead, next week is a traditional purchasing period. Considering factors such as the expected market demand recovery in June and the cost support for nickel salt, it is anticipated that nickel salt prices will rise next week.

NPI:

As of May 21, the average price of SMM 8-12% high-grade NPI was 946.5 yuan/mtu (ex-factory, tax included), up 0.5 yuan/mtu from the previous working day. Supply side, domestically, some smelters that underwent maintenance have resumed production, and the increase in output has driven a slight rise in overall production. In Indonesia, the current domestic trade premiums for pyrometallurgy 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 production 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, the overall transaction situation has not improved significantly. The intended purchase prices for raw materials by mainstream steel mills have stabilized, and some traders have shown willingness to stockpile, with purchase prices rising slightly compared to the previous period. Overall, it is expected that high-grade NPI prices will stabilize in the short term.

Stainless steel:

As of May 21, reported by SMM, today, the SS futures market fluctuated. As macro-level disruptive factors gradually faded, market trading logic returned to being dominated by fundamentals. Amidst the tug-of-war between bullish and bearish forces, the short-term market direction remains unclear. Looking back at last week, driven by favourable macro front, stainless steel spot prices strengthened significantly. Under the market psychology of "rush to buy amid continuous price rise and hold back amid price downturn", downstream purchasing demand was concentrated and released. However, entering this week, the pent-up demand from the previous period has largely been met, and market transaction activity has significantly declined, increasing the pressure on traders to sell. To boost sales, some traders chose to offer discounts, leading to an overall weak performance in spot prices.

In the futures market, the most-traded 2507 contract fluctuated upward slightly. At 10:30 a.m., SS2507 was quoted at 12,870 yuan/mt, up 10 yuan/mt from the previous trading day. The spot premiums/discounts for 304/2B stainless steel in the Wuxi area ranged from 350-600 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 average price of cold-rolled uncut edge 304/2B coils was 13,175 yuan/mt in Wuxi and 13,175 yuan/mt in Foshan; the price of cold-rolled 316L/2B coils was 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 cities; the cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

As the effects of macroeconomic policies that frequently disrupted the market in the early stage gradually faded, the stainless steel market is returning to an operational logic dominated by supply and demand fundamentals. Currently, stainless steel prices have touched lows in recent years, coupled with the fact that high-grade NPI prices have stopped falling and begun to rebound, further sharp declines face certain resistance. However, the supply-demand imbalance in the industry remains prominent: on the supply side, stainless steel production continues to remain high, and social inventory stays elevated; in terms of raw materials, the market expects a supply surplus of high-carbon ferrochrome this month, with room for price concessions. On the demand side, with the end of the traditional peak consumption season, downstream demand remains sluggish. Coupled with recent sharp price fluctuations, market sentiment is cautious, significantly increasing the pressure on traders to sell. If there is a lack of new favourable macro front support in the future, under the dual pressures of high supply and weak demand, stainless steel prices may continue to remain in the doldrums in the short term.

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 NI1.3% laterite nickel ore from the Philippines to China was $43.5-45/wmt, unchanged WoW; the FOB price of NI1.3% was $32-35/wmt, unchanged WoW; the CIF price of NI1.5% was $58-59/wmt, down $1/wmt, and the FOB price of NI1.5% 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 heavier rainfall in areas such as Sta Cruz, Eastern Davao, and Tawi Tawi, the rainfall in Surigao was relatively reduced 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 the inversion margin, the sentiment of domestic NPI smelters for raw material procurement has been frustrated, 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% YoY 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 sentiment among Philippine mines. Looking ahead, the domestic transaction prices of Philippine nickel ore may be dragged down by downstream demand and face downward pressure. However, the Indonesian side has a significant impact on Philippine ore prices.

Indonesia's HPM rises, but pyrometallurgy ore premiums struggle to increase due to fundamental factors

The transaction prices of Indonesian ore increased slightly last week, mainly due to a minor increase in 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 from the previous week. The SMM delivery-to-factory price for 1.6% Indonesia's local ore was $53.3-57.3/wmt, up $0.7/wmt or 1.28% WoW. For limonite ore, the transaction price remained unchanged during the week, with the SMM delivery-to-factory price for 1.3% Indonesia's local ore at $23-25/wmt.

For pyrometallurgy ore: On the supply side, weather still disrupts nickel ore supply, with frequent rainfall in Sulawesi and Halmahera entering the rainy season in May. Frequent rainfall affects the shipments available from 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 experiencing losses, limiting their acceptance of high-priced nickel ore. On the inventory side: After experiencing low inventory levels and ore-buying stockpiling in April, the inventory levels of Indonesian pyrometallurgy smelters have improved, reducing their willingness to buy ore at prices above market rates. Overall, despite supply-side disruptions such as weather conditions and potential delays in RKAB approvals, due to the drag from weak downstream prices, there is limited room for significant price increases in the short term for Indonesia's local pyrometallurgy ore.

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