Stainless steel destocking pressure is relatively high, and the market price of high-grade NPI may decline again [SMM Nickel Morning Meeting Summary]

6.17 Morning Meeting Summary

Macro News:

(1) The National Bureau of Statistics (NBS) announced today that in May, the total retail sales of consumer goods reached 4,132.6 billion yuan, up 6.4% YoY. Excluding automobiles, the retail sales of consumer goods amounted to 3,731.6 billion yuan, up 7.0% YoY. From January to May, the total retail sales of consumer goods were 20,317.1 billion yuan, up 5.0% YoY. Excluding automobiles, the retail sales of consumer goods were 18,432.4 billion yuan, up 5.6% YoY.

(2) The latest financial data released by the People's Bank of China showed that the growth rate of broad money (M2) supply remained basically stable, and the growth rate of aggregate social financing remained at a relatively high level. At the end of May, the outstanding aggregate social financing was 426.16 trillion yuan, up 8.7% YoY, 0.3 percentage points higher than the same period last year. In May, the incremental aggregate social financing was 2.29 trillion yuan, a year-on-year increase of 224.7 billion yuan. M2 grew by 7.9% YoY, narrow money (M1) grew by 2.3% YoY, and the outstanding balance of RMB loans grew by 7.1% YoY, remaining at around 8% after adjusting for the impact of local government debt replacement. Based on historical patterns, economic activities tend to be more active in June, leading to a corresponding increase in financing demand. It is expected that the growth of financial aggregates will remain stable in the next phase.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price was 119,400-122,050 yuan/mt, with an average price of 120,725 yuan/mt, a decrease of 775 yuan/mt from the previous trading day. The quotation range for spot premiums of Jinchuan #1 refined nickel was 2,400-2,600 yuan/mt, with an average premium of 2,500 yuan/mt, unchanged from the previous trading day. The quotation range for spot premiums and discounts of electrodeposited nickel from major domestic brands was 0-400 yuan/mt.

Futures Market:

The most-traded SHFE nickel contract (NI2507) opened lower in the night session last Friday and fluctuated upward, but the price continued to weaken in today's daytime session, dropping to a low of 119,000 yuan/mt. As of 11:30, SHFE nickel closed at 119,690 yuan/mt, a decrease of 340 yuan/mt or 0.28% from the previous trading day.

In the short term, nickel prices are expected to fluctuate rangebound between 118,000-123,000 yuan/mt. If Indonesia tightens its nickel ore policies, it may trigger a phased rebound. However, in the medium and long term, the surplus pressure is difficult to resolve, and coupled with the lack of incremental demand, the upside room for nickel prices is limited.

Nickel Sulphate:

On June 16, the SMM battery-grade nickel sulphate index price was 27,577 yuan/mt. The quotation range for battery-grade nickel sulphate was 27,580-28,050 yuan/mt, with an average price remaining stable WoW.

On the cost side, LME nickel prices declined slightly this week. Demand side, despite signs of recovery in nickel salt demand MoM in June, overall demand remains in a low phase. Affected by some raw material inventory and weak order demand, during this week's traditional procurement period, the inquiry and transaction activity for nickel salts by precursor companies were both low. Supply side, nickel salt producers' order signing situation for June was poor, with some large nickel salt enterprises planning to carry out maintenance shutdowns in June. Given the weak demand and declining costs, some nickel salt producers have already shown signs of price softening.

Looking ahead, considering the continued mediocre downstream demand and weakened bargaining power of some buyers, it is expected that nickel salt prices may further weaken in the short term.

NPI:

On June 16, SMM 8-12% high-grade NPI averaged 930 yuan/mtu (ex-factory, tax included), down 3.5 yuan/mtu from the previous working day. On the supply side, domestically, the decline in finished product prices has led to increased losses for smelters, with east China smelters entering a maintenance state and production being reduced. In Indonesia, the premiums for saprolite ore remain at high levels, keeping the cost line for nickel ore firm. Additionally, the drive to switch to high-grade nickel matte has not been met, and current RKEF capacity still mainly produces high-grade NPI, with overall production likely to rise MoM. On the demand side, major stainless steel mills have a high proportion of long-term contracts for raw materials, and there was a considerable volume of spot orders before the start of this month, leading to weaker external purchase demand currently. With high social inventory of stainless steel, there is significant destocking pressure, and some stainless steel mills are reducing crude steel production, weakening the demand for high-grade NPI. Today, market inquiry activity was weak, and the surplus of high-grade NPI supply and demand put pressure on prices. Overall, the buyer's market pattern is expected to persist in the short term, and the center of the high-grade NPI market may fall again.

Stainless Steel:

SMM reported on June 16 that today, the SS futures market continued to show a weak trend, fluctuating within the range of 12,600-12,500 yuan/mt. Stainless steel spot quotations remained stable overall, but traders generally reported that transactions continued to be mediocre. As the off-season approaches, although stainless steel prices have fallen to relatively low levels, under the backdrop of a loose supply, downstream customers are maintaining a cautious wait-and-see attitude, mainly engaging in just-in-time procurement, making it difficult for prices to rebound significantly. This afternoon, Tsingshan lowered the 201 plate price, with a general reduction of 70-100 yuan/mt, aimed at promoting transactions.

In the futures market, the most-traded contract 2508 fluctuated. At 10:30 am, SS2508 was quoted at 12,560 yuan/mt, up 20 yuan/mt from the previous trading day. The spot premiums and discounts for 304/2B in Wuxi ranged between 360-610 yuan/mt. In the spot market, the prices of cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,750 yuan/mt; the average prices of cold-rolled uncut edge 304/2B coils were 12,875 yuan/mt in Wuxi and 12,875 yuan/mt in Foshan; the prices of cold-rolled 316L/2B coils in Wuxi and Foshan were both 24,000 yuan/mt; the prices of hot-rolled 316L/NO.1 coils in both regions were quoted at 23,350 yuan/mt; the prices of cold-rolled 430/2B coils in Wuxi and Foshan were both 7,500 yuan/mt.

Currently, the stainless steel market is deeply mired in the traditional consumption off-season, with downstream demand remaining sluggish. Despite widespread losses faced by enterprises and production cuts implemented by some steel mills, the current supply remains at a historically high level for the same period due to the large production base in the previous period, resulting in a prominent oversupply contradiction. Stainless steel mills and agents are under increasing pressure to offload inventory, with market pessimism spreading and traders competing to sell, driving stainless steel prices lower. The raw material side is also under pressure, with high-grade NPI prices facing upward resistance due to expectations for production cuts by steel mills; high-carbon ferrochrome prices continue to decline, further weakening the cost support for stainless steel. If subsequent production cuts fall short of expectations, the weak price trend of stainless steel may persist in the short term amid sluggish off-season demand.

Nickel Ore:

Philippine Nickel Ore Prices Remain High, Domestic Firms May Be Forced to Choose Between High-Priced Purchases or Production Cuts

Last week, Philippine nickel ore prices held steady. The CIF price for Philippine laterite nickel ore with 1.3% NI was $44-45/wmt, while the FOB price was $34-36/wmt; the CIF price for 1.5% NI ore was $59-60/wmt, and the FOB price was $49-51/wmt. Supply and demand side, supply side, although major nickel ore loading points in the Philippines experienced rainfall, the persistent rainy weather during the week significantly affected loading progress at nickel mines, with delays widespread compared to expectations. Demand side, downstream NPI prices fell again, and domestic NPI smelters continued to suffer severe losses, dampening raw material procurement sentiment, with demand-side support for nickel ore prices weakening further. For exports to Indonesia, Indonesia's demand for Philippine nickel ore increased, and persistently high nickel ore prices in Indonesia further reinforced Philippine mines' reluctance to budge on prices. Looking ahead, the current price tug-of-war between upstream and downstream, coupled with price disruptions from Indonesia, may keep Philippine nickel ore prices holding up well in the short term, forcing domestic firms to choose between high-priced purchases or production cuts.

Indonesia's Local Limonite Ore Prices Rose This Week, While Saprolite Ore Held Steady

Indonesia's local limonite ore prices rose this week, while saprolite ore 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, SMM's delivery-to-factory price for Indonesia's local laterite nickel ore with 1.6% NI was $54.3-57.3/wmt, flat WoW; for limonite ore, SMM's delivery-to-factory price for Indonesia's local laterite nickel ore with 1.3% NI rose to $26-28/wmt, up $1/wmt or 3.8% YoY. On the saprolite ore front, supply side, the rainy season remains the primary factor contributing to the insufficient supply of nickel laterite ore (Saprolite), adversely affecting ore production and transportation activities. According to feedback from multiple Indonesian mining companies, persistent heavy rainfall has severely disrupted operations, leading to a continued tight supply of ore. Additionally, some miners have yet to receive approval for their RKAB supplementary quotas, which has partially restricted nickel ore sales in the market. Demand side, according to SMM's Indonesia Saprolite Ore Inventory Cycle Index, the average inventory at pyrometallurgy smelters in May increased compared to April, with an average inventory of 2.2 months. Market purchasing sentiment has weakened somewhat. Meanwhile, Indonesia's NPI smelters are still facing the dilemma of operating at a loss, making it difficult for them to withstand further increases in nickel ore prices. Therefore, it is expected that there will be limited room for nickel ore prices to rise in June.

On the limonite ore front, supply side, the supply of limonite ore has been stable recently, but the upcoming rainy season in the Halmahera region is expected to impact the shipment of low-grade laterite nickel ore in the future. Demand side, the MOROWALI industrial park, which had halted production due to an earlier accident, has now largely resumed production. Demand has strengthened, driving up limonite ore prices this week. Looking ahead, with two large-capacity limonite ore projects expected to commence production in H2, subsequent demand for limonite ore is still expected to increase. Meanwhile, there is still demand for cross-island procurement, which may further exacerbate the upward pressure on ore prices. Overall, the price of Indonesian limonite ore is expected to hold up well.