High-Grade NPI Prices Are Under Pressure, With Worsening Dilemmas On Both The Supply And Demand Sides

This week, the average price of SMM 8-12% high-grade NPI was 954.6 yuan/mtu (ex-factory, tax included), marking a 1.3 yuan/mtu increase WoW. However, the overall price performance of high-grade NPI remained under pressure this week.

From the supply side, in China, although the shipment volume of nickel ore from the Philippines continued to increase and the raw material inventory of domestic smelters remained relatively sufficient, the grades of medium- and high-grade nickel ore in the main producing areas of Surigao and Palawan declined, which may lead to a certain degree of decrease in the metal production of domestic smelters. In Indonesia, despite the continued strength of the premium for domestic trade pyrometallurgical nickel ore, smelters faced high cost pressure as a result, and the weakness of finished product prices led to a state of inverted profitability for smelters. Some high-cost production lines may therefore reduce their production loads. However, due to the low profitability of high-grade nickel matte, smelters still focus on high-grade NPI as their main product, and overall production may increase slightly.

On the demand side, the stainless steel market was relatively sluggish after the Dragon Boat Festival. Mainstream steel mills showed low willingness to accept raw material prices, and procurement prices remained flat compared to the previous period. In the short term, under the dual impact of increased supply and weak downstream demand for high-grade NPI, prices may weaken.

From the perspective of the discount of high-grade NPI to refined nickel, the average discount of high-grade NPI to refined nickel this week was 266.94 yuan/mtu, an expansion of 1.44 yuan/mtu WoW. The price of high-grade NPI remained under pressure.

For refined nickel, from a macro perspective, during the Dragon Boat Festival, Trump added new provisions on tariff issues, prolonging the uncertainty of tariffs and leading to significant fluctuations in non-ferrous metal varieties this week. On the fundamentals side, domestic refined nickel production in June continued to decline MoM, but it still could not reverse the fundamental surplus. Weak downstream demand and sluggish transactions of nickel plates kept nickel prices under pressure.

For high-grade NPI, the decline in stainless steel production had an adverse impact on the raw material side. The spot price lacked upward momentum, and the pressure on the raw material side was significant. From the perspective of refined nickel, the expected easing of Indonesia's nickel ore supply has not yet materialized, and the support from the cost center of refined nickel remains strong. Despite bearish factors from the macro perspective, the downward price space remains limited. It is expected that refined nickel prices will continue to fluctuate within a range. Overall, it is expected that the average discount of high-grade NPI to refined nickel may continue to widen and fluctuate next week. Cost side, if the cash cost of high-grade NPI is calculated based on nickel ore prices 25 days ago, the losses of high-grade NPI smelters have deepened this week.

On the raw material side, auxiliary material prices remained in the doldrums this week. Steel mills maintained high inventory levels of coke and coking coal, and the futures market performance of coke and coking coal was also weak. As a result, the cost of auxiliary materials for smelters continued to decline this week. On the ore side, due to strong demand from Indonesia for Philippine nickel ore, this has provided support for the prices of medium- and high-grade nickel ore in the Philippines. However, the deepening of smelters' losses this week was mainly attributed to the weakening of finished product prices. It is expected that auxiliary material prices may remain in the doldrums next week, and the cost line of auxiliary materials may continue to weaken. Regarding nickel ore, due to the slower-than-expected release of ore from Indonesian mines and abundant rainfall in the Philippines, the cost line of nickel ore for smelters remains firm. It is expected that the decline in finished product prices next week may lead to a further deepening of smelters' losses.