Nickel sulphate prices decline, with weak demand as the main cause [SMM Nickel Morning Meeting Summary]

6.3 Nickel Morning Meeting Summary

Macro News:

(1) The US announced the revised annualized quarter-on-quarter growth rate of real GDP for Q1 and the initial jobless claims data for the week ending May 24. The revised GDP growth rate was -0.2%, better than the market expectation of -0.3% and slightly improved from the previous -0.3%, but still indicating an economic contraction. The revised annualized quarter-on-quarter growth rate of the core PCE price index was 3.4%, lower than the expected 3.5% and the previous 3.5%, suggesting a slight easing of inflationary pressures. Initial jobless claims were 240,000, higher than the expected 230,000 and the previous 226,000 (revised), indicating increased short-term pressure in the labour market. These data triggered immediate market volatility, with the US dollar index falling short-term, gold prices rising slightly, and market sentiment oscillating between optimism over easing inflation and concerns about weak employment.

(2) In response to questions regarding whether the economic and trade teams of China and the US have recently held consultations, He Yongqian, spokesperson for the Ministry of Commerce, stated that China has repeatedly engaged with the US over the US's abuse of export control measures in the semiconductor sector. China once again urged the US to immediately correct its erroneous practices, cease discriminatory restrictive measures against China, and jointly uphold the consensus reached at the Geneva high-level talks. China also urged the US to completely eliminate unilateral tariff hikes.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 120,900-123,750 yuan/mt, with an average price of 122,325 yuan/mt, an increase of 800 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 2,500-2,700 yuan/mt, with an average premium of 2,600 yuan/mt, up 100 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.

Futures Market:

The most-traded SHFE nickel contract (NI2507) opened significantly higher in the night session yesterday, closing up 1.25% at 121,240 yuan/mt. The fluctuating trend continued in the morning session, with the closing price at 11:30 AM at 120,810 yuan/mt, up 0.89%. 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 fluctuating range is expected to have a bottom at 115,000 yuan/mt and a top at 123,000 yuan/mt.

Nickel Sulphate:

As of last Friday, the SMM battery-grade nickel sulphate index price was 27,705 yuan/mt, with quotation ranges for battery-grade nickel sulphate at 27,700-28,130 yuan/mt, and the average price slightly lower WoW. From the cost side, LME nickel prices showed a downward trend this week, leading to a decline in the production cost of nickel salts. On the demand side, after industry destocking in May, some precursor producers increased their production schedules MoM in June, but overall market demand remained weak. Affected by the low demand in May, which led to an accumulation of raw material inventory and insufficient purchase willingness from downstream buyers, nickel salt enterprises' enthusiasm for inquiries and transactions significantly weakened this week. On the supply side, the current order signing situation for nickel salt enterprises is poor, with some enterprises expecting production cuts in June. Due to weak downstream demand and falling costs, some nickel salt enterprises have shown signs of loosening their quotations. Looking ahead, considering the continued mediocre downstream demand and weakened bargaining power of some buyers, nickel salt prices are expected to weaken further in the short term.

NPI:

The average price of SMM 8-12% high-grade NPI last week was 953.3 yuan/mtu (ex-factory, tax included), up 6 yuan/mtu from the previous week's average. This week, high-grade NPI prices have risen slightly. On the supply side, domestically, nickel ore prices in the Philippines remain firm, and smelters continue to operate at a loss, with some smelters slightly reducing production. Despite the resumption of production at some North China smelters, overall production remains low. In Indonesia, the domestic trade pyrometallurgy ore premiums remain firm, with widespread losses among smelters. Some high-cost smelters have reduced their production loads, and overall production may slightly weaken. On the demand side, before the Dragon Boat Festival this week, there was no concentrated restocking in the stainless steel market, leading to an inventory buildup in social inventory. Mainstream steel mills' purchases of raw materials at fixed prices were sluggish, with some average-price transactions among traders. In the short term, the easing of Trump's tariffs has not boosted end-use demand for stainless steel. The weak stainless steel prices may exert pressure on raw material prices, but with strong cost support, high-grade NPI prices are expected to remain stable.

Stainless Steel:

Last week, the stainless steel market fully entered the traditional consumption off-season, with significantly weak downstream demand and continuously declining market activity. Despite recent news of production cuts from several stainless steel mills, the actual reduction volume is limited, and the substantive impact on the market is not yet evident in the short term. Supply remains at a high level, with stainless steel mills facing significant pressure to ship goods. Agent traders have seen a notable accumulation of inventory, and social inventory continues to fluctuate at highs. Due to insufficient downstream end-user orders, some futures-to-spot traders have chosen to sell spot cargo at low prices after completing futures arbitrage, resulting in a large volume of goods circulating only within the trading sector and failing to truly enter the end-use consumption market. As a result, spot prices continue to weaken. Currently, stainless steel prices have fallen to historical lows, with smelting costs and selling prices in a state of losses, providing some support to prices from the cost side. However, against the backdrop of shrinking off-season demand and a high supply situation that has not been fundamentally improved, if the shipping pressure persists, stainless steel prices will still face significant downward pressure in the short term.

Nickel Ore:

Philippine nickel ore prices have limited downside room in the short term due to precipitation and multiple factors in Indonesia. Last week, Philippine nickel ore prices held steady. The CIF prices of Philippine laterite nickel ore NI1.3% to China were in the range of $43.5-45/wmt, and the FOB prices were in the range of $32-35/wmt, unchanged WoW. The CIF prices of NI1.5% were in the range of $58-59/wmt, and the FOB prices were in the range of $47-50/wmt, also 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, the continuous rainfall during the week significantly impacted the loading progress at nickel mines, leading to widespread delays compared to expectations. On the demand side, despite the stabilization of downstream NPI prices, domestic NPI smelters continued to face severe losses, dampening sentiment for raw material procurement and weakening the demand-side support for nickel ore prices. Regarding shipments from the Philippines to Indonesia, as of mid-May, the volume of nickel ore shipped from the Philippines to Indonesia exceeded 4 million wmt. The increase in Indonesia's imports of Philippine nickel ore further fueled the reluctance of Philippine mines to budge on prices. Looking ahead, with significant price negotiations between upstream and downstream players, coupled with price disruptions from the Indonesian side, there may be limited room for a substantial downward adjustment in Philippine nickel ore prices in the short term. Indonesia's ore premium remains steady in June; Indonesian high-grade NPI enterprises continue to face losses Last week, prices of Indonesia's local ore held steady. In terms of premiums, the mainstream premium for Indonesia's local laterite nickel ore remained at $26-28/wmt this week. In terms of benchmark prices, the HMA price for the first half of June held steady with a slight decline, at $15,405/mt, down 0.06% from the previous period. Overall, the prices of saprolite ore remained stable this week. The SMM delivery-to-factory price for Indonesia's local laterite nickel ore 1.6% was in the range of $53.3-57.3/wmt, unchanged from last week. For limonite ore prices, the SMM delivery-to-factory price for Indonesia's local laterite nickel ore 1.3% held steady at $23-25/wmt, the same as last week. On the supply side of saprolite ore, as the main nickel ore mining areas, Sulawesi and Halmahera islands continued to face supply disruptions due to frequent rainfall during the week, impeding the mining and transportation processes at some mines. In addition, the slow progress of RKAB approvals continued to affect supply. It is understood that the subsequent supplementary quotas for RKAB are expected to enter the approval process in June and July of H2, but the market remains concerned about the speed of approval for these supplementary quotas. Recently, rumors have circulated in the market about a large number of RKAB quotas being approved in the past few weeks. However, after verification with the Indonesian Ministry of Energy and Mineral Resources (ESDM), these rumors may not be true, and the supply tightness of nickel ore has not yet been alleviated. On the demand side, despite the slow rebound in NPI prices this week, Indonesian NPI smelters are still facing losses, limiting their ability to accept further price increases for nickel ore. Overall, although Indonesia continues to face supply disruptions due to the rainy season and the slow progress of RKAB quota approvals, dragged down by weak downstream demand, there may be limited upside room for the prices of Indonesia's local saprolite ore in the short term, with prices expected to hold steady in June. On the supply side of limonite ore, there have been no significant changes in the recent supply of limonite ore. According to SMM, a major mine in Indonesia has applied for supplementary limonite ore quotas, but these have not yet been approved. On the demand side, most of the HPAL projects in the MOROWALI Industrial Park that were affected by floods in May have resumed production, leading to a rebound in market demand for limonite ore. Additionally, there are expectations for the commissioning of two HPAL smelting projects with significant capacities in H2, which may lead to a significant increase in demand for limonite ore in the future. Looking ahead, SMM expects that limonite ore prices may hold up well.