High-carbon ferrochrome prices continue to decline, stainless steel prices may remain in the doldrums in the short term [SMM Nickel Morning Meeting Summary]

6.12 Morning Meeting Summary

Macro News:

(1) Recently, various automakers have announced that they will shorten the payment period for suppliers to within 60 days, in response to the national and relevant ministries' requirements to ensure the stability of the industry chain and supply chain and promote the high-quality development of the automotive industry. Experts pointed out that automotive supply chain enterprises previously faced long payment cycles, sometimes up to 9 months or even longer, leading to tight cash flows for many small and medium-sized supporting suppliers, who had to rely on discounting, short-term loans, and other means to maintain operations. Shortening the payment period can alleviate the financial pressure on suppliers and enhance their operational resilience and innovation capabilities.

(2) According to informed sources, the US and Mexico are on the verge of reaching an agreement to eliminate Trump's 50% tariff on steel imports below a certain quantity. Meanwhile, Indian and US negotiators have made progress, with negotiations focusing on market access, tariff reductions, and non-tariff barriers for industrial and some agricultural products. India and the US are expected to reach an interim trade agreement before the end of this month.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 121,400-124,000 yuan/mt, with an average price of 122,700 yuan/mt, down 100 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 2,400-2,500 yuan/mt, with an average premium of 2,450 yuan/mt, up 50 yuan/mt from the previous trading day. The spot premiums and discounts quotation range for electrodeposited nickel from mainstream domestic brands is 0-300 yuan/mt.

Futures Market:

The most-traded SHFE nickel contract (NI2507) opened lower and fluctuated slightly during the night session yesterday, with no significant fluctuations during the daytime session. As of 11:30, SHFE nickel closed at 121,710 yuan/mt, up 50 yuan/mt or 0.04% from the previous trading day.

Positive signals have been released from China-US economic and trade consultations, and expectations for US Fed interest rate cuts are diverging. However, the weak demand situation is difficult to improve, and the supply surplus continues to suppress the upside room for nickel prices. In the short term, nickel prices may fluctuate rangebound between 118,000-123,000 yuan/mt.

Nickel Sulphate:

On June 11, the SMM battery-grade nickel sulphate index price was 27,586 yuan/mt, with a quotation range for battery-grade nickel sulphate of 27,580-28,050 yuan/mt, and the average price remained stable WoW.

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 the presence of some raw material inventories 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, nickel salt producers' order bookings for June were weak this week, with some major nickel salt enterprises planning to suspend production for maintenance in June. Given the weak demand and falling costs, some nickel salt producers have shown signs of loosening their quotes.

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 11, the average price of SMM 8-12% high-grade NPI was 944 yuan/mtu (ex-factory, tax included), down 2 yuan/mtu from the previous working day. Supply side, domestically, nickel ore prices in the Philippines remain relatively firm, with smelters continuing to incur losses, and production running at low levels. In Indonesia, the prices of domestic trade saprolite ore continue to rise, pushing up smelters' cost lines again. The weak prices of finished products have led to continued losses for smelters. However, against the backdrop of weak demand for high-grade nickel matte, Indonesia still focuses on high-grade NPI as its main product, resulting in a slight increase in production. Demand side, the stainless steel sector has entered the off-season, with some steel mills conducting maintenance during this period, leading to a decline in production and weaker demand for high-grade NPI. Additionally, the weak price of stainless steel has been transmitted to the stainless steel scrap sector, expanding the economic advantage of stainless steel scrap and putting pressure on high-grade NPI prices. Overall, high-grade NPI prices are expected to remain in the doldrums in the short term.

Stainless Steel:

As of June 11, the SS futures market showed signs of stopping falling and rebounding, with prices once again testing and returning to 12,600 yuan/mt. Yesterday, some agents and traders took advantage of the low prices to build positions and purchase, alleviating the shipping pressure on stainless steel mills to some extent. This morning, stainless steel mills resumed their price-limiting operations. Despite the significant downward shift in the market price center and the lack of obvious positive support, making it difficult for prices to rebound sharply, the resumption of price limits by steel mills, combined with the current low prices in recent years, has also faced resistance to further declines. Some low-priced supplies have disappeared, and quotes have tended to converge.

In the futures market, the most-traded 2508 contract stopped falling and rebounded. At 10:30 a.m., SS2508 was quoted at 12,505 yuan/mt, down 40 yuan/mt from the previous trading day. In the Wuxi region, the spot premiums/discounts for 304/2B were in the range of 465-665 yuan/mt. In the spot market, the cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,800 yuan/mt; the cold-rolled uncut edge 304/2B coils had an average price of 12,925 yuan/mt in Wuxi and 12,925 yuan/mt in Foshan; the cold-rolled 316L/2B coils were priced at 24,000 yuan/mt in Wuxi and 24,000 yuan/mt in Foshan; the hot-rolled 316L/NO.1 coils were quoted at 23,350 yuan/mt in both regions; and the cold-rolled 430/2B coils were both priced at 7,500 yuan/mt in Wuxi and Foshan.

Currently, the stainless steel market is mired in the traditional consumption off-season, with persistently weak downstream demand. Despite widespread losses among enterprises and production cuts implemented by some steel mills, the current supply remains at historically high levels due to the large production base in the early stage, exacerbating the oversupply in the market. Stainless steel mills and agents are facing mounting pressure to ship goods, with market pessimism spreading. Traders are scrambling to sell, pushing stainless steel quotes continuously lower. The raw material side is also under pressure. Affected by expectations for production cuts at steel mills, the upward momentum of high-grade NPI prices has been hindered; high-carbon ferrochrome prices continue to decline, further weakening the cost support for stainless steel. If the subsequent production cuts fall short of expectations, against the backdrop of weak demand in the off-season, the short-term trend of weak stainless steel prices is unlikely to reverse.

Nickel Ore:

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

Philippine nickel ore prices rose slightly last week. The CIF prices of Philippine laterite nickel ore (NI1.3%) shipped from the Philippines to China were $44-45/wmt, and the FOB prices were $34-36/wmt; the CIF prices of NI1.5% were $59-60/wmt, and the FOB prices were $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 rainy weather during the week significantly impacted the loading progress at nickel mines, with loading progress generally delayed compared to expectations. On the demand side, although NPI prices downstream have stabilized, domestic NPI smelters are still suffering severe losses, dampening the sentiment for raw material procurement. The demand-side support for nickel ore prices continues to weaken. In terms of exports to Indonesia, as of the end of May, Philippine exports to Indonesia exceeded 4 million mt, representing a YoY increase of over 300%. Indonesia's demand for Philippine nickel ore has increased, and the high nickel ore prices in Indonesia continue to deepen 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 the Indonesian side, Philippine nickel ore prices may still 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 remain stable in June, with Indonesian high-grade NPI enterprises continuing to suffer 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 at $26-30/wmt last week, but 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 $54.3-57.3/wmt, up $0.5/wmt WoW. In terms of limonite ore prices, the SMM delivery-to-factory price of Indonesia's local laterite nickel ore (1.3%) held steady at $25-27/wmt, up $2/wmt WoW.

In terms of saprolite ore, from the supply side, frequent precipitation on Sulawesi and Halmahera islands continues to affect ore loading and supply from mines. As we enter the second half of the year (H2), the approval of additional RKAB quotas has begun, but this remains insufficient to alleviate the persistently tight supply. After some mines receive their quotas, tender prices have reached new highs, which has instead intensified the sentiment for higher prices in the short term. Looking ahead, the market remains concerned about the approval speed of subsequent additional RKAB quotas. From the demand side, Indonesia's NPI smelters are still experiencing losses, limiting their ability to accept higher nickel ore prices. However, in terms of inventory, smelters' inventory levels remain generally low, and there is still demand for just-in-time procurement. Overall, despite being constrained by downstream demand, supply remains tight, and mines still hold significant bargaining power. It is common for smelters to compete in bidding for ore. Looking ahead, as the June premium has already been agreed upon, saprolite ore prices are expected to remain stable in the short term. If new incentive mechanisms are introduced, there is still a possibility for factory procurement prices to rise.

In terms of limonite ore, from the supply side, there have been no significant changes in limonite ore supply recently. From the demand side, some HPAL projects in the MOROWALI Industrial Park that were previously affected by floods have resumed production. Limonite ore prices in June have returned to March levels. Looking ahead, there are expectations for the commissioning of two HPAL smelting projects with relatively large capacities in H2, indicating a significant expected increase in demand for limonite ore. 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.