Downstream demand weakens, while Philippine nickel ore prices remain firm at high levels [SMM Nickel Morning Meeting Summary]

6.16 Nickel Morning Meeting Summary

Macro News:

(1) Tariffs - ① Trump will sign key parts of the US-UK trade agreement within days. ② Canadian PM: Progress made in US-Canada trade talks. ③ Trump: Auto tariffs may rise in the near future. ④ US Department of Commerce announces new auto tariff credit process and also announces tariff hikes on steel home appliances, including washing machines and refrigerators, starting from the 23rd.

(2) Affected by the sharp escalation of geopolitical tensions in the Middle East, US and Brent crude oil prices surged rapidly, with gains expanding to 4%. Spot gold broke through $3,410/oz, hitting a new high since May 8. Israel has closed its airspace until further notice. Iranian state TV reports that Iran's air defense system is on full alert. According to CNN, Trump has convened a cabinet-level meeting. The US and Iran are scheduled to hold the sixth round of nuclear talks in Oman on Sunday.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 119,950-123,050 yuan/mt, with an average price of 121,500 yuan/mt, down 400 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 2,400-2,600 yuan/mt, with an average premium of 2,500 yuan/mt, up 75 yuan/mt from the previous trading day. The spot premiums and discounts quotation range for mainstream domestic brands of electrodeposited nickel is 0-400 yuan/mt.

Futures Market:

The most-traded SHFE nickel contract (NI2507) fell below 120,000 yuan/mt again after a low opening in the night session yesterday, dropping to a low of 119,700 yuan/mt. Prices rallied during the day session, returning above 120,000 yuan/mt. As of 11:30, SHFE nickel closed at 120,330 yuan/mt, down 140 yuan/mt or 0.12% from the previous trading day. Positive signals were released from China-US economic and trade consultations, and expectations for US Fed interest rate cuts diverged. 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 remain in a sideways movement within the range of 118,000-123,000 yuan/mt.

Nickel Sulphate:

As of last Friday, the SMM battery-grade nickel sulphate index price was 27,583 yuan/mt, with a quotation range for battery-grade nickel sulphate of 27,580-28,050 yuan/mt and an average price unchanged from the previous week. Demand side, this week is not a traditional procurement period, and market enthusiasm is low. Some precursor plants have increased their inquiry enthusiasm due to new orders at month-end. However, overall market inquiries and transactions are relatively sluggish. Supply side, due to the current weak market demand, some nickel salt smelters have stopped quoting prices. Currently, finished product inventories at nickel salt smelters are relatively sufficient, and some have a high willingness to ship, but due to still strong cost support, nickel sulphate quotations remain relatively flat compared to last week. Looking ahead, considering the continued mediocre downstream demand and the weakened bargaining power of some sellers, nickel salt prices are expected to weaken further in the short term.

NPI:

Last week, the average price of SMM 8-12% high-grade NPI was 942.3 yuan/mtu (ex-factory, tax included), down 12.3 yuan/mtu from the previous week's average. This week, high-grade NPI prices have continued to weaken. Supply side, domestically, shipments of nickel ore from the Philippines are still increasing, and smelters' raw material inventories are relatively sufficient. However, due to the decline in finished product prices, some domestic smelters may consider reducing production loads, and domestic metal content may weaken. In Indonesia, the current domestic trade pyrometallurgical nickel ore premiums remain relatively firm, placing a heavy cost burden on smelters. Weak finished product prices have led to continued losses for smelters, and some high-cost production lines may reduce production loads. However, due to the weak profitability of high-grade nickel matte, high-grade NPI remains the main product, with overall production likely to see a slight increase. Demand side, this week, the stainless steel market has seen significant fluctuations, with top-tier enterprises implementing a policy of no price or quantity limits, leading stainless steel prices to hit new lows in recent years. Steel mills' willingness to pay for raw material procurement has weakened again. In the short term, the supply and demand situation for high-grade NPI is under pressure, and prices are expected to remain weak.

Stainless Steel:

Last week, the stainless steel spot market continued to weaken, with a prominent supply-demand imbalance and persistently sluggish downstream demand. Previous attempts by steel mills to stabilize prices through price limits were unsuccessful, leading to an accumulation of in-plant inventory due to poor sales. During the week, price limits were temporarily lifted, prompting agents and traders to cut prices to boost sales, pushing prices to a new five-year low. Even after price limits were reinstated, prices remained low. Low prices stimulated traders to replenish inventory, alleviating pressure on steel mills' in-plant inventory. However, social inventory surged to nearly 1 million mt, posing significant pressure on subsequent consumption. Currently, the market is mired in the traditional off-season. Despite production cuts by some steel mills due to losses, supply remains at historically high levels, exacerbating the oversupply situation. Stainless steel mills and agents are facing intense shipping pressure, and under the spread of pessimistic sentiment, traders are competing to ship, leading to continuously falling quotations. The raw material side is also under pressure, with high-grade NPI production constrained by expectations for production cuts and high-carbon ferrochrome prices declining, weakening cost support. If subsequent production cuts fall short of expectations, stainless steel prices are unlikely to reverse their weak trend in the short term amid weak off-season demand.

Nickel Ore:

High nickel ore prices in the Philippines may force domestic enterprises to choose between high-priced procurement or production cutsLast week, Philippine nickel ore prices held steady. The CIF prices of Philippine laterite nickel ore (NI1.3%) shipped 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 laterite nickel ore (NI1.5%) 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 precipitation at major nickel ore loading points in the Philippines, the continuous rainy weather during the week significantly impacted the loading progress at nickel mines, leading to widespread delays compared to expectations. On the demand side, the downstream NPI prices fell again, and domestic NPI smelters continued to face severe losses, dampening the sentiment for raw material procurement. The support for nickel ore prices from the demand side continued to weaken. Regarding exports to Indonesia, Indonesia's demand for Philippine nickel ore increased, and the high nickel ore prices in Indonesia continued to strengthen 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, and domestic enterprises may be forced to choose between purchasing at high prices or cutting production. Indonesia's local limonite ore prices rose this week, while saprolite ore prices held steady. Indonesia's local limonite ore prices rose this week, while saprolite ore prices held steady. In terms of premiums, the mainstream premium for Indonesia's local laterite nickel ore remained at $26-28/wmt this week. For saprolite ore, the SMM Indonesia's local laterite nickel ore (1.6%) delivery-to-factory price was $54.3-57.3/wmt, unchanged from the previous week. For limonite ore prices, the SMM Indonesia's local laterite nickel ore (1.3%) delivery-to-factory price rose to $26-28/wmt, up $1/wmt or 3.8% WoW. On the supply side of saprolite ore, the rainy season remains the primary factor contributing to the insufficient supply of saprolite ore, adversely affecting ore production and transportation activities. According to feedback from multiple Indonesian mining companies, the continuous heavy rainfall has severely disrupted operations, leading to ongoing tight ore supply. Additionally, some miners have not yet received approval for their RKAB supplementary quotas, partially limiting nickel ore sales in the market. On the demand side, according to the SMM Indonesia's saprolite ore inventory cycle index, the average inventory of pyrometallurgy smelters in May increased compared to April, with an average inventory of 2.2 months. Market procurement sentiment has weakened. Meanwhile, Indonesia's NPI smelters are still facing cost-inverting difficulties and cannot afford further increases in nickel ore prices. Therefore, it is expected that there will be limited room for nickel ore price increases in June. On the supply side of limonite ore, the recent supply of limonite ore has been stable, but the upcoming rainy season in the Halmahera region may affect the shipment of low-grade laterite nickel ore. On the demand side, the MOROWALI industrial park, which had previously halted production due to an accident, has now largely resumed production. Demand has strengthened, driving up limonite ore prices this week. Looking ahead, with two larger-capacity limonite ore projects expected to commence production in H2, the demand for limonite ore is expected to continue to increase. Meanwhile, the demand for cross-island procurement remains, potentially further exacerbating the upward pressure on ore prices. Overall, the prices of Indonesia's limonite ore may hold up well.