Stainless steel prices have reached historical lows, while nickel salt prices may rise [SMM Nickel Morning Meeting Summary]

5.29 Morning Meeting Summary

Macro News:

(1) The plenary session of the Expert Advisory Group of the Anti-Monopoly and Anti-Unfair Competition Committee of the State Council was held in Beijing. The meeting emphasized the need to closely align with the committee's work plans, focusing on key tasks such as accelerating the construction of a unified national market, comprehensively addressing "cut-throat competition," and strengthening competition regulation and law enforcement. The group was urged to take proactive measures and better fulfill its responsibilities as an expert advisory body, contributing wisdom and strength to enhancing fair competition governance capabilities and maintaining a fair and competitive market order.

(2) European Central Bank (ECB) Governing Council member Robert Holzmann stated that the bank should postpone any further interest rate cuts until at least September, warning that caution was warranted given the brewing trade war between the EU and the US. He believed there was "no reason" for the ECB to cut interest rates at its June and July meetings. Holzmann remarked, "The risks of further rate cuts would outweigh the benefits of maintaining the current level." He argued that further rate cuts at this stage might be "completely ineffective" for economic activity in the Eurozone. Holzmann's hawkish remarks suggest divisions among ECB rate-setters as they weigh how to respond to the trade war initiated by Trump ahead of their next meeting on June 5.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 122,000-124,500 yuan/mt, with an average price of 123,250 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 2,100-2,300 yuan/mt, with an average premium of 2,200 yuan/mt, unchanged from the previous trading day. The premiums and discounts quotation range for Russian refined nickel is 100-400 yuan/mt, with an average premium of 250 yuan/mt, also unchanged from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2507) opened lower and weakened during the night session yesterday. Prices continued to decline in the morning session, closing at 121,620 yuan/mt by 11:30, down 0.73%. Nickel prices have broken through the previous 123,000 yuan/mt platform and have since closed lower consecutively, with weak support below.

Currently, the macro front has a relatively small impact on nickel prices. Nickel prices are primarily under pressure due to supply and demand surpluses and high inventory levels, with weak cost support below. The market outlook suggests that nickel prices will likely remain in the doldrums.

Nickel Sulphate:

On May 28, the SMM battery-grade nickel sulphate index price was 27,813 yuan/mt. The quotation range for battery-grade nickel sulphate was 27,760-28,270 yuan/mt, with an average price unchanged from the previous week.

From the cost side, LME nickel has returned to fundamental factors, showing a weakening trend, leading to a slight decline in the production costs of nickel salt smelters. On the demand side, nickel salt demand is expected to strengthen MoM in June. Recently, precursor manufacturers have shown significantly increased activity in inquiring about nickel salt prices, and their purchase willingness has increased. On the supply side, some nickel salt smelters have maintained stable quotes, while others have raised their quote coefficients due to increased demand and limited raw material inventory. Looking ahead, next week is a traditional procurement period. Considering factors such as the market demand recovery in June and the cost support for nickel salt, it is expected that nickel salt prices will rise somewhat next week.

Nickel Pig Iron (NPI):

As of May 28, the average price of SMM 8-12% high-grade NPI was 954 yuan/mtu (ex-factory, tax included), up 0.5 yuan/mtu from the previous working day. On the supply side, domestically, nickel ore prices in the Philippines remain relatively firm, imposing a significant cost burden on smelters, and domestic production continues to operate at a low level. In Indonesia, the latest round of HPM for domestic trade nickel ore has seen only a slight decline. Coupled with the generally stable with slight rise in premiums for ongoing order negotiations, the low finished product prices have led to a loss-making situation for smelters, and production is expected to decrease slightly. On the demand side, the benchmark prices of mainstream stainless steel mills remained flat WoW. The market is dominated by low-price transactions. Downstream demand has been impacted by tariff changes and the current off-season in the stainless steel market, resulting in weak purchase willingness for high-grade NPI by steel mills. However, supported by underlying costs and the fact that market liquidity has not yet loosened, the price center has risen slightly. Overall, it is expected that high-grade NPI prices will remain stable in the short term.

Stainless Steel:

As of May 28, the SS futures market broke out of its previous consolidation pattern and experienced a sharp decline, with the most-traded contract price falling below the 12,700 yuan threshold again. The spot market continued to be sluggish, influenced by the persistent weakness in downstream demand and the weakening futures market, leading to a continuous decline in transaction prices. Although there have been frequent reports of production cuts by stainless steel mills in the market today, the actual scale of these cuts is currently limited, and the substantive impact of supply-side reductions on the market will take time to materialize. Therefore, the stainless steel market is expected to remain in the doldrums in the short term.

In the futures market, the most-traded 2507 contract fell sharply. At 10:30 a.m., SS2507 was quoted at 12,750 yuan/mt, down 85 yuan/mt from the previous trading day. In the spot market, the spot premiums/discounts for 304/2B in Wuxi ranged from 420-620 yuan/mt. In the spot market, the cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,950 yuan/mt; the cold-rolled uncut edge 304/2B coils had an average price of 13,100 yuan/mt in Wuxi and 13,100 yuan/mt in Foshan; the cold-rolled 316L/2B coils were priced at 24,050 yuan/mt in Wuxi and 24,050 yuan/mt in Foshan; the hot-rolled 316L/NO.1 coils were quoted at 23,350 yuan/mt in both Wuxi and Foshan; and the cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

Currently, the stainless steel market has entered the traditional consumption off-season, with significantly weak downstream demand. However, the supply side continues to maintain high production levels, placing immense pressure on stainless steel mills to ship their products. As a result, agent traders are experiencing significant inventory backlogs, and social inventory continues to fluctuate at highs. Due to insufficient downstream end-user orders, some futures-to-spot arbitrage traders are selling spot cargo at low prices after completing arbitrage in the futures market. Some cargoes are only circulating within the trading sector and failing to reach end-users. Despite the rebound in high-grade NPI prices, stainless steel prices being at historical lows, and the formation of certain support from corporate losses, in the context of shrinking off-season demand and an unchanged high-supply pattern, if the shipping pressure persists, stainless steel prices will still face downward pressure in the short term.

Nickel Ore:

Philippine nickel ore prices have limited downside room in the short term due to rainfall and multiple factors in Indonesia

Last week, Philippine nickel ore prices remained stable. The CIF price of Philippine laterite nickel ore (NI1.3%) shipped from the Philippines to China was $43.5-45/wmt, and the FOB price was $32-35/wmt, unchanged from the previous week. The CIF price of NI1.5% was $58-59/wmt, and the FOB price was $47-50/wmt, also unchanged from the previous week. In terms of supply and demand, on the supply side, although there was rainfall at major nickel ore loading points in the Philippines, the continuous rainfall during the week significantly impacted the loading progress of nickel mines, with loading progress generally delayed compared to expectations. On the demand side, although downstream NPI prices have stabilized and stopped falling, domestic NPI smelters are still experiencing severe losses, dampening their sentiment towards raw material procurement. The support for nickel ore prices from the demand side continues to weaken. On the cost side, the transaction prices for some Philippine nickel mines with an NI grade of 1.3% were finalized during the week. Due to active procurement by traders, the final CIF prices did not fall. As a result, the immediate profits of downstream NPI plants are difficult to recover, and raw material procurement has reached an impasse. It is not ruled out that plants may have intentions to cut production in the future. 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 year-on-year increase of over 200% compared to the same period last year. The increase in Indonesia's imports of Philippine nickel ore has further strengthened the reluctance of Philippine mines to budge on prices. Looking ahead, there is significant price negotiation between upstream and downstream players, coupled with price disturbances from the Indonesian side. In the short term, it is likely that there will be limited room for significant downward adjustments in Philippine nickel ore prices.

Indonesian ore prices remained stable this week, with the market awaiting the next round of quoted price transactions

Last week, the transaction prices of Indonesian ore remained stable. For saprolite 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. For limonite ore, the delivery-to-factory price of MM Indonesia's local ore (1.3%) was $23-25/wmt.

Saprolite ore: On the supply side, weather-related disruptions to nickel ore supply persist. Frequent rainfall from midday to nighttime continues in Sulawesi, and Halmahera Island also entered the rainy season in May. The frequent precipitation has affected 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. In terms of inventory: After experiencing low inventory levels and ore-buying stockpiling in April, the current inventory levels of Indonesian pyrometallurgy enterprises have slightly improved, and their willingness to compete for ore at prices above the market rate has decreased. Additionally, the subsequent supplementary quota approval process for RKAB is expected to commence in June. However, the market remains concerned about the approval speed of the subsequent supplementary quota for RKAB. Overall, despite supply-side disruptions such as weather-related factors and the possibility that the RKAB approval progress may fall short of expectations, dragged down by weak downstream prices, there is limited room for short-term price increases in the Indonesian domestic trade saprolite ore market.

Limonite ore: Due to the impact of a tailings dam collapse incident at some projects in the MOROWALI Industrial Park, MHP production decreased in April, and downstream smelters pushed down limonite ore prices. As of May, most of the relevant projects in MOROWALI have resumed production, and market demand for limonite ore has rebounded. Looking ahead, there are expectations for new HPAL projects to commence production in H2, and the subsequent supply and demand for limonite ore may start to tighten. SMM expects that limonite ore prices may hold up well in the future.