High-Grade Nickel Pig Iron Prices Stabilize Amid Supply and Demand Dynamics

This week's average price for SMM 8-12% high-grade nickel pig iron (NPI) reached 947.3 RMB per nickel point (ex-factory, including tax), an increase of 5.4 RMB per nickel point compared to last week. This indicates a stabilization and recovery trend in the high-grade NPI prices following recent fluctuations.

On the supply side, domestically, although nickel ore shipments from the Philippines have increased, the tight supply situation from Indonesia has not significantly improved, which continues to support the price of Philippine nickel ore. Domestic smelters, operating at a loss, lack production motivation, resulting in persistently low output levels. Additionally, the Indonesian nickel ore market remains tight, with nickel ore premiums maintaining high levels in the short term. Due to falling finished nickel prices, some production lines might adjust their production load or switch to producing some high-grade nickel matte, potentially affecting their output.

On the demand side, the stainless steel market performance was mediocre this week, with a slow reduction in social inventory and a lackluster rise in spot prices. Stainless steel mills' raw material purchases remain driven largely by immediate needs, with low-priced supplies rare and a noticeable increase in purchase prices from traders compared to earlier periods. Given these conditions, the short-term price for high-grade NPI is expected to have room for further upward movement, although the extent may be limited. This week, the average discount of high-grade NPI to electrolytic nickel was 288.75 RMB per nickel point, narrowing by 21.05 RMB per nickel point compared to last week.

On the macro front, the U.S. House of Representatives advanced Trump's tax cut plan, expected to increase the fiscal deficit by about $4 trillion over the next decade. However, significant uncertainty remains regarding Trump's policies, including subsequent tariff negotiations, causing nickel prices to experience fluctuations this week. On the cost front, the sustained high premiums on Indonesian nickel ore and tight supply of intermediates support the intrinsic cost of pure nickel.

Regarding pure nickel, despite macro uncertainties, the price of raw materials for pure nickel remains strong, with limited downside risk. It is anticipated that next week, the price gap between high-grade NPI and electrolytic nickel may continue to narrow.

On the raw material front, when calculating the cash cost of high-grade NPI based on nickel ore prices from 25 days ago, the inverted cost scenario for high-grade NPI smelters narrowed this week. Auxiliary material prices were relatively weak this week; high coke inventories pushed downstream steel mills to suppress prices, and increasing coal supply also weakened its price, further reducing the auxiliary material cost line for smelters. Regarding nickel ore prices, driven by strong demand from Indonesia, prices for Philippine nickel ore stayed stable to strong. Due to the stabilization and recovery of finished product prices, the inverted cost situation for smelters eased this week.

Next week, auxiliary material prices might continue to exhibit weakness, potentially further lowering the auxiliary material cost line for smelters. Additionally, due to the favorable impact of Indonesian policies on Philippine nickel ore, nickel ore prices may strengthen again, causing smelters to remain in an inverted cost scenario, though the extent is anticipated to narrow.