Nickel salt smelter's production costs decline, precursor plant's inquiry activity increases [SMM Nickel Morning Meeting Summary]

Summary of Morning Meeting on May 23

Macro News:

(1) On Wednesday local time, the US Treasury Department auctioned off $16 billion in 20-year Treasury bonds. This latest auction was one of the worst performances for this maturity since its introduction five years ago. The final winning yield for this auction was 5.047%, marking the second time that the yield for a 20-year US Treasury bond auction has exceeded the 5% threshold. This winning yield was 24 basis points higher than the 4.810% recorded in April. The auction's winning yield was approximately 1.2 basis points higher than the pre-issue rate of 5.035%, representing the largest tail spread since December last year. Following the auction results, US stocks, US Treasury bonds, and Bitcoin all fell.

(2) According to foreign media reports, the EU is expected to share a revised trade proposal with the US, aiming to inject momentum into negotiations with the Trump administration, amid ongoing skepticism about the possibility of reaching a transatlantic agreement. According to informed sources, the new document includes proposals that consider US interests, including international labor rights, environmental standards, economic security, and the gradual reduction of tariffs to zero on non-sensitive agricultural and industrial products from both sides. The document, which was submitted to officials in Washington earlier this week, also outlines mutual investments and strategic procurement in the fields of energy, artificial intelligence, and digital connectivity. Informed sources stated that the EU aims to cooperate with the US and seek a balanced and mutually beneficial agreement. One of the sources said that the two sides are still studying each other, and the European Commission may need authorization from member states to begin formal negotiations. US Secretary of Commerce Lutnick: He hopes to reach trade agreements with most major partners before the tariff suspension expires this summer.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 123,400-125,600 yuan/mt, with an average price of 124,500 yuan/mt, a decrease of 25 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 premium and discount quotation range for Russian nickel is 100-300 yuan/mt, with an average premium of 200 yuan/mt, also unchanged from the previous trading day.

Recently, spot market transactions have been mediocre, with most quotations remaining stable.

Futures Market:

The most-traded SHFE nickel contract (NI2506) continued its fluctuating trend, with no significant volatility during the session. As of 11:30, the closing price was 123,370 yuan/mt, up 0.01%. In terms of inventory, as of May 21, LME nickel inventory decreased by 312 mt to 201,786 mt in a single day.

Currently, nickel prices are primarily influenced by "intensified policy disruptions and deepening supply-demand imbalance," maintaining a fluctuating trend 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 22, the SMM index price for battery-grade nickel sulphate was 27,800 yuan/mt, with a quotation range for battery-grade nickel sulphate at 27,760-28,270 yuan/mt, and the average price remained stable compared to the previous day.

Cost side, the return of LME nickel to fundamental factors has led to a weakening trend, resulting in a slight decline in the production costs of nickel salt smelters. Demand side, the overall demand for nickel salts in June is expected to strengthen. Recently, precursor plants have shown significantly increased activity in inquiring about nickel salt prices, indicating enhanced purchase willingness. Supply side, some nickel salt smelters have maintained stable quotations, while others have 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 salts, it is anticipated that nickel salt prices will rise next week.

NPI:

As of May 22, the average price of SMM 8-12% high-grade NPI was 949 yuan/mtu (ex-factory, tax included), up 2.5 yuan/mtu from the previous working day. Supply side, domestically, some smelters that underwent maintenance have resumed production, with output climbing, leading to a slight increase in overall production. In Indonesia, the current premium for domestic trade pyrometallurgy ore remains relatively firm, and finished product prices have fallen below the cost line. As a result, some high-cost production lines have been affected by losses, leading to a reduction in production load. It is expected that overall production will slightly decline. Demand side, stainless steel prices have been supported by the easing of tariff policies, with prices stabilizing and rising. However, overall transaction volumes have not significantly improved. The intended purchase prices for raw materials by mainstream steel mills have stabilized, with some traders showing willingness to stockpile, leading to a slight increase in purchase prices. Today, the market transaction atmosphere has warmed up, with transaction prices reaching recent highs. Overall, it is expected that high-grade NPI prices will stabilize and rise in the short term.

Stainless steel:

As of May 22, according to SMM, today, the SS futures market continued to exhibit a fluctuating trend. As the previous favourable macro front gradually faded and the traditional peak consumption season approached its end, the purchasing demand released by downstream end-users due to favourable policy incentives has been largely met. Meanwhile, the overall reduction in stainless steel production has been limited, with market supply remaining high and the supply of goods continuing to be loose, resulting in sluggish transactions in the spot market. To alleviate shipping pressure, agents and traders have adopted a strategy of offering slight discounts. It is worth noting that stainless steel producers previously adjusted their production structure by reducing capacity for 300 series and increasing production for 200 series and 400 series. However, the downstream demand structure has not changed accordingly. This has significantly increased the supply in the 200 series stainless steel market, leading to a sharp rise in sales pressure. Affected by this, Tsingshan Group lowered the plate prices of 200 series stainless steel today, further reflecting the intensified supply-demand imbalance faced by this category.

In the futures market, the most-traded 2507 contract fluctuated upward slightly. At 10:30 a.m., SS2507 was quoted at 12,875 yuan/mt, up 5 yuan/mt from the previous trading day. In the spot market of Wuxi, the spot premiums/discounts for 304/2B stainless steel ranged from 345 to 595 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 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 both quoted at 23,100 yuan/mt in Wuxi and Foshan; the cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

As the impact of macroeconomic policies that frequently disrupted the market in the early stage gradually fades, 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 stop falling and beginning to rebound of high-grade NPI prices, 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 maintain a high level, and social inventory remains elevated; on the raw material side, 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 continues to be weak. Coupled with recent sharp price fluctuations, the market sentiment is cautious, and the pressure on traders to sell has significantly increased. If there is a lack of new favourable macro front support in the future, under the dual pressure of high supply and weak demand, stainless steel prices may continue to be 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 remained generally stable with a slight decline last week. The CIF price of Philippine laterite nickel ore NI1.3% from the Philippines to China was $43.5~45/wmt, unchanged from WoW; the FOB price of NI1.3% was $32~35/wmt, unchanged from WoW; the CIF price of NI1.5% was $58~59/wmt, down $1/wmt from WoW; the FOB price of NI1.5% was $47~50/wmt, unchanged from 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 the Surigao area decreased compared to the past few weeks. Overall, after the decrease 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 raw material procurement sentiment of domestic NPI smelters has been frustrated, and the demand-side support for nickel ore prices 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 rise in Indonesia's imports of Philippine nickel ore has further intensified the refusal of Philippine mines to budge on prices. Looking ahead, the domestic transaction prices of Philippine nickel ore may face downward pressure due to downstream factors, but the impact of Indonesian ore prices on Philippine ore prices remains significant.

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

The transaction prices of Indonesia's local ore increased slightly last week, primarily due to a minor HPM adjustment 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 WoW, a 1.28% increase. 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.

Pyrometallurgy ore: On the supply side, weather-related disruptions to nickel ore supply persist, with frequent rainfall in Sulawesi and the onset of the rainy season in Halmahera in May, affecting the available shipments from mines. On the buyer side, NPI prices have stabilized at low levels, with 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 purchase ore at prices above market rates. Overall, despite supply-side disruptions such as adverse weather conditions and potential delays in RKAB approvals, constrained by weak downstream prices, there is limited room for significant short-term price increases 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, leading to a decline in market transaction prices for limonite ore after the Labour Day holiday, while MHP profits remain 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.