Nickel ore prices in the Philippines remain relatively firm, while stainless steel has entered the seasonal active destocking phase [SMM Nickel Morning Meeting Summary]

6.6 Morning Meeting Summary

Macro News:

(1) Tariffs - ① It is rumored that the US-Canada agreement may be reached next week. Canadian Prime Minister: If negotiations fail, Canada is prepared to take retaliatory measures against the US. ② EU trade official: Negotiations with the US are progressing steadily in the right direction. ③ UK Prime Minister: Very confident that US tariffs can be reduced in a very short period. ④ US Commerce Secretary: Will complete analysis and formulate tariff standards for aircraft parts by month-end; will not mutually eliminate tariffs and barriers with Vietnam. ⑤ Mexico will announce measures to address US steel and aluminum tariffs next week.

(2) US Economic Data - ① ADP employment in May increased by 37,000, far below the expected 110,000 and the previous 62,000. ② The US ISM Non-Manufacturing Index for May fell to 49.9, contracting for the first time in nearly a year, with expectations of an increase from 51.6 to 52.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 121,700-124,500 yuan/mt, with an average price of 123,100 yuan/mt, down 375 yuan/mt from the previous trading day. The quotation range for spot premiums of Jinchuan #1 refined nickel is 2,300-2,600 yuan/mt, with an average premium of 2,450 yuan/mt, down 50 yuan/mt from the previous trading day. The quotation range for premiums and discounts of Russian refined nickel is 100-600 yuan/mt, with an average premium of 350 yuan/mt, unchanged from the previous trading day. Recently, trading in the spot market has been relatively sluggish.

Futures Market:

The most-traded SHFE nickel contract (NI2507) opened lower and weakened during the night session, fluctuating downward during the day session. As of 11:30, the closing price was 121,620 yuan/mt, down 0.38%.

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." In the short term, the bottom of the fluctuation range is seen at 118,000 yuan/mt, with the top under pressure at 123,000 yuan/mt.

Nickel Sulphate:

On June 5, the SMM battery-grade nickel sulphate index price was 27,610 yuan/mt. The quotation range for battery-grade nickel sulphate was 27,580-28,050 yuan/mt, with the average price weakening slightly from yesterday.

On the cost side, LME nickel prices fluctuated today. Demand side, despite signs of a MoM improvement in nickel salt demand in June, overall demand remains in a sluggish phase. Affected by some raw material inventory and weak order demand, during this week's traditional procurement period, the inquiry and transaction activity of precursor enterprises for nickel salts were both low. Supply side, the order signing situation for nickel salt smelters in June was poor this week, with some large nickel salt enterprises planning to conduct production shutdowns and maintenance in June. Given the weak demand and declining costs, some nickel salt producers have shown signs of loosening their quotations.

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.

Nickel Pig Iron (NPI):

As of June 5, the average price of SMM 8-12% high-grade NPI was 956.5 yuan/mtu (ex-factory, tax included), up 0.5 yuan/mtu from the previous working day. Supply side, domestically, nickel ore prices in the Philippines remain relatively firm, imposing a significant cost burden on smelters. Driven by the resumption of production at a smelter in North China after maintenance, production has seen a slight increase. In Indonesia, the current domestic trade premiums for saprolite ore remain relatively firm, with a minimal decline in HPM, providing strong cost support for nickel ore at smelters. The struggle to raise finished product prices has led to a situation where mainstream smelters are still operating at a loss. However, due to the weak incentive to produce high-grade nickel matte, the overall decline in production is expected to be limited. Demand side, stainless steel has entered a seasonal phase of active destocking. During the Dragon Boat Festival, mainstream stainless steel mills lowered their guidance prices for cold-rolled and hot-rolled products, putting pressure on raw material prices. Meanwhile, due to the limited availability of low-priced goods in the market and the firm cost support for high-grade NPI, there was concentrated procurement downstream today, with procurement prices not significantly higher than the previous period. Overall, high-grade NPI prices are expected to remain under pressure in the short term.

Stainless Steel:

As of June 5, the SS futures market was in the doldrums. The spot market continued its previous sluggish performance, with market transactions dominated by just-in-time procurement due to the strong wait-and-see sentiment among downstream end-users. To alleviate shipping pressure, steel mill agents and traders offered discounts for sales promotions, but with little effect. For 200 series stainless steel, as steel mills lowered their list prices, traders followed suit by reducing their quotations, but market activity remained unimproved, and transaction volumes remained dismal. This week, due to the concentrated arrivals of goods recently, social inventory has risen significantly, further exacerbating market sales pressure. The stainless steel spot market is unlikely to change its weak pattern in the short term.

In the futures market, the most-traded 2507 contract was in the doldrums. At 10:30 a.m., SS2507 was quoted at 12,690 yuan/mt, up 30 yuan/mt from the previous trading day. In the Wuxi region, spot premiums and discounts for 304/2B were in the range of 480-680 yuan/mt. In the spot market, cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,850 yuan/mt; 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; cold-rolled 316L/2B coils were priced at 24,050 yuan/mt in Wuxi and 24,050 yuan/mt in Foshan; hot-rolled 316L/NO.1 coils were quoted at 23,350 yuan/mt in both regions; cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

Currently, the stainless steel market has fully entered the traditional consumption off-season, with downstream demand remaining sluggish. Despite a decline in stainless steel production since March, it has still maintained historically high levels, leading to a significant surplus in market supply and persistently high social inventory. At this stage, market transactions are mainly concentrated on low-priced warrant cargoes, while non-standard high-priced cargoes are primarily procured on a just-in-time basis, resulting in low overall trading activity. Although stainless steel enterprises are generally facing losses and multiple steel mills have announced production cuts, these measures have yet to effectively boost the spot market amid the dual pressures of weakening market demand and high inventory. From the raw material side, influenced by expectations of production cuts at stainless steel mills, the price of high-grade NPI struggles to rise, while the price of high-carbon ferrochrome has shown a pullback, leading to a continuous weakening of cost support for stainless steel. If subsequent production cuts fall short of expectations, against the backdrop of the consumption off-season, stainless steel prices may continue to remain in the doldrums in the short term.

Nickel Ore:

Philippine nickel ore prices remain firm amid rainfall and multiple factors from Indonesia

Philippine nickel ore prices held steady this 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 $34-36/wmt, showing an increase WoW. The CIF price of NI1.5% was $58-59/wmt, and the FOB price was $47-50/wmt, remaining unchanged WoW. In terms of supply and demand, on the supply side, although major nickel ore loading points in the Philippines experienced rainfall, with continuous rainfall during the week significantly affecting the loading progress of nickel mines, the loading progress was generally delayed compared to expectations. On the demand side, although downstream NPI prices have stabilized after halting their decline, domestic NPI smelters are still facing severe losses, dampening sentiment for raw material procurement and leading to a continuous weakening of 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 has 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 disturbances from Indonesia, there may be limited room for a substantial downward adjustment in Philippine nickel ore prices in the short term.

Indonesian ore premiums remain stable in June; Indonesian high-grade NPI enterprises continue to face losses

Prices of Indonesia's local ore held steady this week. In terms of premiums, the mainstream premium for Indonesia's local laterite nickel ore remained at $26-28/wmt this week. Regarding benchmark prices, the HMA price for the first half of June held steady with a slight decline, at $15,405/mt, down 0.06% MoM from the previous period. Overall, the price of saprolite ore remained stable this week. SMM's delivery-to-factory prices for Indonesia's local laterite nickel ore with 1.6% nickel content stood at $53.3-57.3/wmt, unchanged WoW. In terms of limonite ore prices, SMM's delivery-to-factory prices for Indonesia's local laterite nickel ore with 1.3% nickel content remained stable at $23-25/wmt, the same as last week.

For saprolite ore, in terms of supply, as Sulawesi and Halmahera are the main nickel ore mining regions, the supply situation during the week was still disrupted by frequent precipitation, hindering 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 approval speed of these quotas. Recently, rumors have circulated in the market that a large number of RKAB quotas were approved in the past few weeks. However, after verification with the Ministry of Energy and Mineral Resources (ESDM) of Indonesia, these rumors may not be true, and the tight supply of nickel ore has not yet been alleviated. On the demand side, although NPI prices in Indonesia have shown a slow rebound this week, as of now, Indonesian NPI smelters are still experiencing losses, with limited ability to accept further increases in nickel ore prices. Overall, despite supply disruptions in Indonesia due to the rainy season and the slow progress of RKAB quota approvals, the short-term upside room for Indonesia's local saprolite ore prices may be limited due to the drag from downstream demand, with saprolite ore prices expected to remain stable in June.

For limonite ore, in terms of supply, 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 has not yet received approval. 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. In addition, there are expectations for the commissioning of two HPAL smelting projects with relatively large capacities in H2, which may lead to a significant increase in subsequent demand for limonite ore. Looking ahead, SMM expects that limonite ore prices may hold up well.