Supply Disrupted, Philippine Nickel Ore Prices Strong in Short Term [SMM Nickel Morning Meeting Summary]

6.9 Nickel Morning Meeting Minutes

Macro News:

(1) On the evening of June 5, President Xi Jinping had a phone conversation with US President Trump at the latter's request. Xi pointed out that to correct the course of China-US relations, it is crucial to steer the ship and set the direction, especially by eliminating various interferences or even sabotage. At the US proposal, the economic and trade heads of the two countries held talks in Geneva, marking an important step toward resolving economic and trade issues through dialogue and consultation. This move was widely welcomed by all sectors in both countries and the international community, proving that dialogue and cooperation are the only correct choice. Both sides should make good use of the established economic and trade consultation mechanisms, adopt an equal attitude, respect each other's concerns, and strive for win-win results. China is sincere in this regard and also principled.

(2) The PBOC announced on the 5th that to maintain ample liquidity in the banking system, it would conduct 1,000 billion yuan of outright reverse repo operations on June 6, with a fixed amount, interest rate bidding, and multiple price winning methods, for a term of 3 months (91 days). The central bank broke the convention of announcing outright reverse repo operations at month-end by making the announcement at the beginning of the month. Industry experts noted that the PBOC is strengthening liquidity regulation through various monetary policy tools to implement a moderately loose monetary policy.

Refined Nickel:

Spot Market:

Today, the SMM #1 refined nickel price stood at 122,050-124,750 yuan/mt, with an average price of 123,400 yuan/mt, up 300 yuan/mt from the previous trading day. The mainstream spot premium for Jinchuan #1 refined nickel was quoted at 2,300-2,600 yuan/mt, with an average premium of 2,450 yuan/mt, unchanged from the previous day. The spot premiums/discounts for domestic mainstream brands of electrodeposited nickel were quoted at -50-300 yuan/mt.

Futures Market:

The most-traded SHFE nickel contract (NI2507) continued its fluctuating trend from the previous day, with little volatility in the futures market. As of 11:30, the closing price was 121,860 yuan/mt, up 0.12%. Medium and long-term, the global nickel overcapacity issue remains unresolved, with the nickel market under triple pressure from "high supply, weak demand, and tight liquidity." In the short term, the bottom is seen at 118,000 yuan/mt, while the top faces resistance at 123,000 yuan/mt.

Nickel Sulphate:

As of last Friday, the SMM battery-grade nickel sulphate index price was 27,605 yuan/mt, with quotations ranging from 27,580 to 28,050 yuan/mt. The average price declined WoW. Demand side, some precursor plants showed lukewarm inquiry and purchase willingness for nickel salt due to ample raw material inventory and weak overall order demand, with lower price acceptance. Supply side, given weakening demand, some nickel salt smelters lowered quotations, shifting seller pricing power. Looking ahead, considering persistently mediocre downstream demand and weakened seller bargaining power, nickel sulphate prices may further decline in the short term.

NPI:

Last week, the weekly average price of SMM 8-12% high-grade NPI was 954.6 yuan/mtu (ex-factory, tax included), up 1.3 yuan/mtu WoW. This week, high-grade NPI prices faced downward pressure. Supply side, domestically, Philippine nickel ore shipments continued to increase, and smelter raw material inventory remained sufficient. However, declining grades of medium-high-grade nickel ore from Surigao and Palawan may reduce metal content for domestic smelters. In Indonesia, domestic trade pyrometallurgical nickel ore premiums remained firm, with smelters burdened by high costs and weak finished product prices leading to losses. Some high-cost production lines may reduce output, but with weak high-grade nickel matte profit margins, high-grade NPI remains the main product, likely resulting in a slight production increase. Demand side, post-holiday, the stainless steel market performed sluggishly, with mainstream steel mills unwilling to accept higher raw material prices, keeping purchase prices unchanged from the previous period. Short-term, high-grade NPI prices may weaken under rising supply and weak downstream consumption.

Stainless Steel:

The first week after the holiday entered June's stainless steel off-season, with heavy market pessimism. Holiday-period mill price cuts dampened market confidence, leading to persistently sluggish spot transactions this week, with downstream players maintaining just-in-time procurement. Major markets like Foshan and Wuxi saw social inventory rise significantly due to increased arrivals and slow shipments. Despite trade promotions, market response was lukewarm, with no improvement in transactions. The stainless steel market remains mired in off-season difficulties. Although production has declined since March, high initial volumes keep supply elevated, with stubbornly high social inventory. Most enterprises face losses, and while multiple mills plan production cuts, weak demand and high inventory pressure have yet to see cuts effectively boost the market. Raw material side, high-grade NPI price gains were capped by production cut expectations, while high-carbon ferrochrome prices continued to pull back, further weakening cost support. If subsequent production cuts fall short of expectations, stainless steel prices may remain weak in the short term, with grim recovery prospects.

Nickel Ore:

Philippine nickel ore faces limited downside room in the short term due to rainfall and multiple factors from Indonesia. Philippine nickel ore prices rose slightly last week. The CIF prices of Philippine laterite nickel ore (NI1.3%) delivered to China were in the range of $44-45/wmt, while the FOB prices were in the range of $34-36/wmt. The CIF prices of NI1.5% ore were in the range of $59-60/wmt, and the FOB prices were in the range of $49-51/wmt. 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 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 significant losses, dampening sentiment for raw material procurement. Support for nickel ore prices from the demand side continued to weaken. Regarding exports to Indonesia, as of the end of May, Philippine nickel ore exports to Indonesia exceeded 4 million mt, representing a YoY increase of over 300%. Indonesia's demand for Philippine nickel ore increased, and the high nickel ore prices in Indonesia continued to fuel 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, Philippine nickel ore prices may continue to hold up well in the short term. Domestic enterprises may be forced to choose between purchasing at high prices or cutting production. Indonesia's ore premiums remained stable in June, while Indonesian high-grade NPI enterprises continued to face losses. Prices of Indonesia's local ore strengthened slightly last week. In terms of premiums, the mainstream premiums for Indonesia's local laterite nickel ore remained in the range of $26-30/wmt last week, although some high-price transactions were recorded. Overall, prices of saprolite ore rose slightly last week. The SMM delivery-to-factory price of Indonesia's local laterite nickel ore (1.6%) was in the range of $54.3-57.3/wmt, up $0.5/wmt WoW. For limonite ore prices, the SMM delivery-to-factory price of Indonesia's local laterite nickel ore (1.3%) remained stable at $25-27/wmt, up $2/wmt WoW. On the supply side of saprolite ore, frequent rainfall on Sulawesi and Halmahera islands continued to affect ore loading and supply. As we entered H2, the approval of additional RKAB quotas began, but this had little impact on the persistently tight supply. After some mines received quotas, new highs were recorded in tender prices, temporarily fueling sentiment for higher prices. Looking ahead, the market remains concerned about the approval speed of additional RKAB quotas. On the demand side, Indonesian NPI smelters are still in the phase of losses, with limited ability to absorb higher nickel ore prices. However, from an inventory perspective, smelter inventory levels remain generally low, and there is still demand for just-in-time procurement. Overall, despite being dragged down by the downstream sector, supply remains tight, giving mines strong bargaining power. Competitive bidding for ore by smelters is common. Looking ahead, with June premiums already agreed upon, saprolite ore prices are expected to remain stable in the short term. If new incentive mechanisms emerge, there is still potential for factory procurement prices to rise. In terms of limonite ore supply, there have been no significant changes in the supply of limonite ore recently. On the demand side, some HPAL projects in the MOROWALI Industrial Park that were affected by floods have resumed production. In June, limonite ore prices returned to the levels seen in March. Looking ahead, it is expected that two HPAL smelting projects with relatively large capacities will commence operation in H2. There is a clear expectation of an increase in demand for limonite ore in the future. Additionally, Halmahera Island will gradually enter the rainy season, leading to an increase in cross-island procurement demand. Overall, limonite ore prices are more likely to rise than fall.