Nickel salt demand shows signs of recovery on a MoM basis, while precursor plants exhibit low inquiry and transaction activity for nickel salt [SMM Nickel Morning Meeting Summary]

5.30 Morning Meeting Summary

Macro News:

(1) The US Court of International Trade ruled on Wednesday local time that US President Trump did not have the authority to impose a blanket tariff on nearly all countries, thereby declaring the "Emancipation Day" tariff measure of April 2, which triggered a global trade war and could have upended the world economy, legally invalid. The Court of International Trade, located in Manhattan, New York, stated that the US Constitution grants the US Congress the exclusive power to regulate trade with other countries, and that the emergency powers claimed by the President to protect the US economy do not override these powers.

(2) He Lifeng, member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, met with Dan Simkowitz, Co-President of Morgan Stanley, at the Great Hall of the People on the 28th. He Lifeng stated that China is committed to promoting high-quality development through high-level opening-up, which will energize and drive both the Chinese and global economies. He welcomed more US financial institutions, including Morgan Stanley, and long-term capital to continue deepening mutually beneficial cooperation with China and actively participate in the construction and development of China's capital market. Simkowitz expressed his pleasure at the substantive progress made in the US-China economic and trade talks, stating that Morgan Stanley will continue to expand its presence in the Chinese market and provide high-quality services to promote investment cooperation between US and Chinese enterprises.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 120,000-123,050 yuan/mt, with an average price of 121,525 yuan/mt, a decrease of 1,725 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 2,300-2,700 yuan/mt, with an average premium of 2,500 yuan/mt, an increase of 300 yuan/mt from the previous trading day. The premiums and discounts quotation range for Russian nickel is 100-400 yuan/mt, with an average premium of 250 yuan/mt, unchanged from the previous trading day.

Due to the significant decline in SHFE nickel futures prices yesterday, trading volume in the afternoon spot market was active, with the premium range at 2,200-2,500 yuan/mt. Today, there is less refined nickel circulating in the market, and premiums have risen significantly.

Futures Market:

The most-traded SHFE nickel contract (NI2507) fell sharply yesterday, closing at 119,950 yuan/mt, a daily decline of 2.1%. The cumulative weekly decline reached 3.2%, breaking through the key support level of 120,000 yuan/mt. The night session continued to probe the bottom, reaching a low of 118,630 yuan/mt. Prices rebounded somewhat in the morning session today, returning to the 120,000 yuan/mt level, but remained in the doldrums. As of 11:30, the closing price was 120,340 yuan/mt, up 0.72%.

In the medium and long term, the global nickel overcapacity issue remains unresolved, with the nickel market under triple pressure of "high supply, weak demand, and tight funding". The short-term oscillation bottom is seen at 115,000 yuan/mt, with the top under pressure at 123,000 yuan/mt.

Nickel sulphate:

On May 29, the SMM index price for battery-grade nickel sulphate was 27,705 yuan/mt, with a quotation range of 27,700-28,130 yuan/mt for battery-grade nickel sulphate. The average price weakened WoW.

On the cost side, LME nickel prices dropped back slightly to $15,125 today, weakening the cost support. Demand side, despite signs of a MoM improvement in nickel salt demand in June, overall demand remained in a sluggish phase. Affected by some raw material inventory and weak order demand, the inquiry and transaction activity of precursor enterprises for nickel salts were low during this week's traditional procurement period. Supply side, the order signing situation for nickel salt producers in June was poor this week, with some large nickel salt enterprises planning to carry out shutdown maintenance work in June. Given weak demand and falling costs, some nickel salt producers' quotations have shown signs of loosening.

Looking ahead, considering the continued mediocre downstream demand and the weakened bargaining power of some buyers, nickel salt prices are expected to weaken further in the short term.

NPI:

As of May 29, the average price of SMM 8-12% high-grade NPI was 954 yuan/mtu (ex-factory, tax included), unchanged from the previous working day. Supply side, domestically, the prices of nickel ore from the Philippines remained relatively firm, imposing a significant cost burden on smelters, with domestic production remaining at a low level. In Indonesia, the decline in the new round of HPM for domestic trade nickel ore was slight. Coupled with the generally stable with slight rise in the premium for ongoing order negotiations, the low finished product prices have led to a loss-making situation for smelters, and production is expected to decline slightly. Demand side, the futures prices of mainstream stainless steel mills remained unchanged WoW, with transactions mainly at low prices in the market. Downstream demand was impacted by tariff shocks and the current off-season in the stainless steel market, resulting in weak purchase willingness for high-grade NPI by steel mills. However, with cost support from below and no significant easing in market liquidity, the price center has slightly risen. Overall, high-grade NPI prices are expected to remain stable in the short term.

Stainless steel:

As of May 29, the SS futures market exhibited a volatile pattern today, with the intraday low once touching the 12,600 yuan/mt mark before gradually rebounding, but still maintaining a low level overall. The spot market continued to show weakness, with sluggish market transactions due to the persistent downturn in downstream end-use demand, and prices lacked upward momentum. It is worth noting that several stainless steel mills have recently announced maintenance and production cut plans. With the gradual implementation of these measures, the situation of supply surplus in the market is expected to be alleviated. Meanwhile, the current stainless steel prices have fallen to historical lows, resulting in a loss-making situation for smelters due to the inversion of smelting costs and selling prices, with the cost side providing significant support for prices. Against this backdrop, the room for stainless steel prices to decline further has become relatively limited.

In the futures market, the most-traded contract 2507 fluctuated. At 10:30 a.m., SS2507 was quoted at 12,710 yuan/mt, down 40 yuan/mt from the previous trading day. In Wuxi, the spot premiums/discounts for 304/2B stainless steel ranged from 460 to 660 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 the same in Foshan. The cold-rolled 316L/2B coils were priced at 24,050 yuan/mt in Wuxi and the same in Foshan. The hot-rolled 316L/NO.1 coils were quoted at 23,350 yuan/mt in both Wuxi and Foshan. 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 notably weak downstream demand. However, the supply side continues to maintain high production levels, exerting significant pressure on stainless steel mills to sell their products. This has led to a notable backlog of inventory among agent traders, with social inventory continuing to fluctuate at highs. Due to insufficient downstream end-user orders, some futures-to-spot 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 losses incurred by enterprises providing some support, the stainless steel market is still expected to face downward pressure in the short term if selling pressure persists, given the shrinking demand during the off-season and the unchanged high supply situation.

Nickel Ore:

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

Philippine nickel ore prices held steady last week. The CIF price of Philippine laterite nickel ore (NI1.3%) 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 rainy weather during the week significantly impacted the loading progress at nickel mines, causing delays that were more widespread than expected. On the demand side, although downstream NPI prices have stabilized and stopped falling, domestic NPI smelters are still suffering severe losses, dampening their enthusiasm for 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 ore mines with a grade of NI:1.3% were finalized during the week. Due to active procurement by traders, the final CIF prices did not decline. 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 some plants may intend 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, up over 200% YoY. The increase in Indonesia's imports of Philippine nickel ore has further intensified the reluctance of Philippine mines to budge on prices. Looking ahead, there is a clear tug-of-war between upstream and downstream players over prices, coupled with price disruptions from the Indonesian side. In the short term, there may be limited room for a significant drop in Philippine nickel ore prices.

Indonesian ore prices held steady this week, with the market awaiting the next round of quoted transaction prices.

Last week, the transaction prices of Indonesian ore remained stable. For saprolite ore, the mainstream premium for Indonesia's local ore in May still ranged from $26 to $28/wmt, unchanged from the previous week. The SMM delivery-to-factory price for 1.6% Indonesia's local ore was $53.3 to $57.3/wmt. For limonite ore, the SMM delivery-to-factory price for 1.3% MM Indonesia's local ore was $23 to $25/wmt.

Saprolite ore: On the supply side, weather disruptions to nickel ore supply persist. Frequent rainfall from midday to nighttime continues in Sulawesi, and Halmahera also entered the rainy season in May. Frequent rainfall has affected the shippable volumes of 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-stockpiling rushes in April, the inventory levels of Indonesian pyrometallurgical smelters have slightly improved, and their willingness to compete for ore at prices above market levels has decreased. Additionally, the approval process for subsequent RKAB supplementary quotas is expected to begin in June, but the market remains concerned about the approval speed of these quotas. Overall, despite supply-side disruptions such as weather factors and the potential for slower-than-expected RKAB approval progress, constrained by weak downstream prices, there is limited room for a short-term price increase in Indonesia's local pyrometallurgical ore.

For 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. By May, most related projects in MOROWALI had resumed production, and market demand for limonite ore rebounded. Looking ahead, there are expectations for new HPAL projects to come online in H2, and the supply and demand dynamics for limonite ore may begin to tighten. SMM expects that limonite ore prices may hold up well in the future.