The weak demand for refined nickel is difficult to improve, and the supply surplus continues to suppress the upside room of nickel prices [SMM Nickel Morning Meeting Summary]

Summary of Morning Meeting on June 13

Macro News:

(1) Data released by the US Department of Labor showed that the full impact of Trump's across-the-board tariff hikes had not yet fully materialized, with US CPI inflation in May coming in below expectations across the board. The data indicated that the US unadjusted CPI year-on-year rate for May was 2.4%, lower than the market expectation of 2.5%. The seasonally adjusted CPI month-on-month rate for May was 0.1%, below the expected 0.2% and the previous value of 0.2%. Trump called on the US Fed to cut interest rates by 100 basis points.

(2) From June 9 to 10 local time, He Lifeng, the Chinese lead for the China-US economic and trade consultations and Vice Premier of the State Council, held the first meeting of the China-US economic and trade consultation mechanism with the US lead, US Treasury Secretary Bessent, Commerce Secretary Raimondo, and Trade Representative Tai in London, UK. Both sides engaged in candid and in-depth dialogue, exchanged in-depth views on economic and trade issues of mutual concern, reached a consensus in principle on the framework of measures to implement the important consensus reached during the phone call between the two heads of state on June 5 and to consolidate the outcomes of the Geneva economic and trade talks, and made new progress in addressing each other's economic and trade concerns.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price was 120,650-123,150 yuan/mt, with an average price of 121,900 yuan/mt, down 800 yuan/mt from the previous trading day. The quotation range for spot premiums of Jinchuan #1 refined nickel was 2,350-2,500 yuan/mt, with an average premium of 2,425 yuan/mt, down 25 yuan/mt from the previous trading day. The quotation range for spot premiums/discounts of electrodeposited nickel from mainstream domestic brands was -100-300 yuan/mt.

Futures Market:

The most-traded SHFE nickel contract (NI2507) opened lower in the night session yesterday and prices continued to decline, once again breaking below the 120,000 yuan/mt level, and fluctuated around the 120,500 yuan/mt level in the daytime session. As of 11:30, SHFE nickel closed at 120,490 yuan/mt, down 1,020 yuan/mt from the previous trading day, with a change of 0.84%.

Positive signals were released from the China-US economic and trade consultations. Expectations for US Fed interest rate cuts diverged, but the weak demand situation was difficult to improve. The supply surplus continued to suppress the upside room for nickel prices, and nickel prices were likely to maintain sideways movement within the 118,000-123,000 yuan/mt range in the short term.

Nickel Sulphate:

On June 12, the SMM battery-grade nickel sulphate index price was 27,585 yuan/mt, with the quotation range for battery-grade nickel sulphate being 27,580-28,050 yuan/mt, and the average price remaining stable WoW.

On the cost side, LME nickel prices fluctuated today. Demand side, despite signs of recovery in nickel salt demand MoM in June, overall demand remained in a sluggish phase. Affected by the partial inventory of raw materials and weak order demand, the inquiry and transaction activity of precursor companies for nickel salts were low during the traditional procurement periods this week. Supply side, the order signing situation for nickel salt producers in June was poor this week, with some large nickel salt enterprises planning to conduct shutdown 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 12, the average price of SMM 8-12% high-grade NPI was 939 yuan/mtu (ex-factory, tax included), down 5 yuan/mtu from the previous working day. Supply side, domestically, nickel ore prices in the Philippines remain relatively firm, with smelters continuing to experience losses and production running at low levels. In Indonesia, the price of domestic trade saprolite ore continues to rise, pushing up smelters' cost lines again. The weak price of finished products has led to continued losses for smelters. However, against the backdrop of poor 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 the price of high-grade NPI. Overall, high-grade NPI prices are expected to remain in the doldrums in the short term.

Stainless Steel:

As of June 12, the SS futures market oscillated around the 12,600 yuan/mt mark. Despite stainless steel mills resuming price limit strategies, market prices have continued to decline, with overall quotations remaining low. During the period of volatile prices in the previous two days, the market concentrated on trading low-priced cargoes. Today, ultra-low-priced cargoes have gradually diminished, and transactions have returned to mediocrity. The low prices during the week have prompted traders to replenish their stocks, driving social inventory to a new high, approaching 1 million mt again, adding significant pressure to the subsequent destocking of stainless steel inventory.

In the futures market, the most-traded contract 2508 oscillated. At 10:30 a.m., SS2508 was quoted at 12,605 yuan/mt, up 100 yuan/mt from the previous trading day. In the Wuxi region, the spot premiums/discounts for 304/2B were in the range of 365-565 yuan/mt. In the spot market, cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,800 yuan/mt; 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; cold-rolled 316L/2B coils were priced at 24,000 yuan/mt in Wuxi and 24,000 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 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 in Sulawesi and Halmahera continues to affect ore loading and supply at mines. As we enter 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 dragged down 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, the June premium has been agreed upon, and 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 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.