High-Grade NPI Market Faces Price Decline Amid Increased Supply and Stainless Steel Market Volatility

This week, the average price of SMM 8-12% high-grade NPI was 942.3 yuan/mtu (ex-factory price, tax included), up 12.3 yuan/mtu MoM. However, the overall market price of high-grade NPI showed a weakening trend this week.

Supply side, domestically, nickel ore shipments from the Philippines continued to increase, and smelters had relatively sufficient raw material inventories. However, due to the decline in finished product prices, some domestic smelters may choose to reduce their production loads, which could lead to a weakening in domestic metal supply. In Indonesia, the premium for domestic trade pyrometallurgical nickel ore remained firm, and smelters faced significant cost pressures. Despite the weak finished product prices leading some high-cost production lines to reduce their loads, the main product remains high-grade NPI due to the weak profitability of high-grade nickel matte, and overall production may increase slightly.

Demand side, the stainless steel market experienced significant volatility this week, with major top-tier enterprises adopting a policy of no price or quantity limits. Stainless steel prices hit new lows in recent years, and steel mills' willingness to pay for raw material procurement further weakened. In the short term, high-grade NPI faces significant pressure on the supply and demand front, and prices may continue to remain weak. Additionally, the average discount of high-grade NPI to refined nickel this week was 273.2 yuan/mtu, an expansion of 6.26 yuan/mtu MoM.

Macro perspective, the Trump administration added new tariff provisions, continuing to increase tariff uncertainty, leading to volatile operations in the non-ferrous metals market this week. On the fundamentals side, domestic refined nickel production in June decreased MoM but did not improve the fundamental surplus situation. In terms of downstream demand, nickel plate transactions were sluggish this week, leading to sideways movement in nickel prices.

Overall, the continuous decline in stainless steel prices has exerted significant pressure on the raw material side. For refined nickel, although the expected easing of Indonesian nickel ore supply has not materialized, the cost support for refined nickel remains strong. Despite bearish factors on the macro front, the downside room for prices is limited, and refined nickel prices are expected to remain rangebound. In summary, the average discount of high-grade NPI to refined nickel is expected to continue to expand next week. Cost side, based on nickel ore prices 25 days ago, the losses in cash costs for high-grade NPI smelters deepened further this week. On the raw material side, auxiliary material prices remained weak, with coke and coking coal still in a price reduction cycle, leading to a continued weakening of the auxiliary material cost line for smelters. On the ore side, Indonesia's strong demand for Philippine nickel ore supported the prices of medium- to high-grade nickel ore in the Philippines. The deepening of smelters' losses in cash costs this week was mainly due to the weakening of finished product prices. It is expected that next week, auxiliary material prices may maintain a weakening trend, and the auxiliary material cost line may continue to weaken. Regarding nickel ore, given that the supply from Indonesian mines fell short of expectations and that some regions in the Philippines experienced abundant rainfall, the nickel ore cost line for smelters will remain firm. It is expected that next week, the decline in finished product prices will further deepen smelters' losses in cash costs.