Surplus pressure in medium and long-term refined nickel supply remains difficult to resolve, with limited upside room for nickel prices [SMM Nickel Morning Meeting Summary]

6.18 Morning Meeting Summary

Macro News:

(1) Tariffs- ① Trump announced that the UK and the US had signed a trade agreement, and Lutnick would decide on the exemption quotas for steel and aluminum tariffs. ② Reports indicated that the EU was prepared to conditionally accept a uniform 10% tariff imposed by the US, with the EU describing the claim as speculative. ③ India and the US planned to sign an interim agreement before July 9. ④ During the G7 Summit, the leaders of Japan and the US held a brief meeting, with the progress of trade negotiations remaining unclear. ⑤ Trump stated that the US-Canada agreement must include tariffs, while Canada expressed that export tariffs on Canadian goods should be eliminated.

(2) On Monday, Eastern Time, US President Trump and UK Prime Minister Starmer jointly announced that they had finalised the general terms of the trade agreement reached last month. The agreement covered trade terms for steel, ethanol, automobiles, and beef. The US planned to set a quota of 100,000 units per year for British automobile imports, with a tariff rate of 10%. The UK committed to expanding market access for US beef, ethanol, grains, and some industrial products.

Refined Nickel:

Spot Market:

On June 17, the SMM 1# refined nickel price is 118,500-121,150 yuan/mt, with an average price of 119,825 yuan/mt, a decrease of 900 yuan/mt from the previous trading day. The mainstream spot premiums for Jinchuan #1 refined nickel are quoted in the range of 2,500-2,700 yuan/mt, with an average premium of 2,600 yuan/mt, a slight increase of 100 yuan/mt from the previous trading day. The spot premiums/discounts for electrodeposited nickel from mainstream domestic brands are quoted in the range of 0-400 yuan/mt.

Futures Market:

Affected by the volatile external macro environment, nickel prices accelerated their decline. The most-traded SHFE nickel contract (NI2507) moved downwards after a higher opening and remained in the doldrums: it opened at 119,740 yuan/mt, up slightly by 70 yuan, but quickly fell during the session, reaching a low of 118,150 yuan/mt. As of 11:30, SHFE nickel closed at 118,520 yuan/mt, down 1,150 yuan/mt from the previous trading day, a decrease of 0.96%. LME nickel was also under pressure, temporarily quoted at $15,000/mt.

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 pressure of supply surplus is difficult to resolve, coupled with a lack of incremental demand, limiting the upside room for nickel prices.

Nickel Sulphate:

On June 17, the SMM battery-grade nickel sulphate index price was 27,503 yuan/mt, with quotation ranges for battery-grade nickel sulphate at 27,500-27,930 yuan/mt, and the average price slightly lower than yesterday.

On the cost side, nickel prices returned to fundamentals this week, showing a slight decline, and the production cost of nickel salts weakened. Demand side, some precursor plants began inquiring about next month's orders this week, but overall demand remained sluggish, with low acceptance of nickel salt prices. In terms of supply, some nickel salt smelters are facing high inventory levels and pressure to ship goods, leading to a relaxation in nickel salt quotes.

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

Nickel Pig Iron (NPI):

As of June 17, the average price of SMM 8-12% high-grade NPI was 927.5 yuan/mtu (ex-factory, tax included), down 2.5 yuan/mtu from the previous working day. On the supply side, domestically, the decline in finished product prices has led to an expansion in smelter losses, with east China smelters entering maintenance mode, resulting in a reduction in production. In Indonesia, the premiums for saprolite ore have remained high recently, keeping the cost line for nickel ore at smelters firm. Additionally, the drive to switch to high-grade nickel matte production has not been met, and currently, RKEF capacity still primarily produces high-grade NPI, with overall production expected to increase MoM from last month. On the demand side, major stainless steel mills have a high proportion of long-term raw material agreements and have achieved considerable spot order trading volumes ahead of this month, resulting in weak external purchase demand. Coupled with the high levels of social inventory for stainless steel and significant destocking pressure, some stainless steel mills have reduced crude steel production, leading to weaker demand for high-grade NPI. Today, market inquiry activity has been weak, and the supply surplus of high-grade NPI has put pressure on prices. Overall, the buyer's market pattern is expected to persist in the short term, and the market center for high-grade NPI may decline again.

Stainless Steel:

As of June 17, according to SMM, today, the SS futures market was weakened by the decline in SHFE nickel, falling below the 12,500 yuan/mt threshold. Against the backdrop of continuously declining stainless steel prices, market confidence has been shaken, with downstream players generally adopting a cautious wait-and-see attitude, focusing on just-in-time procurement, and spot market trading remaining sluggish. Recently, prices for both high-grade NPI and high-carbon ferrochrome have shown a downward trend, resulting in weak cost support for stainless steel. Currently, it is the traditional off-season, and market confidence in a consumption recovery is generally low. Despite stainless steel prices having fallen to low levels, the price cuts have not effectively stimulated trading, and traders are expecting stainless steel mills to cut production to gradually restore the current supply-demand imbalance in the market.

In the futures market, the most-traded 2508 contract weakened and declined. At 10:30 a.m., SS2508 was quoted at 12,500 yuan/mt, down 60 yuan/mt from the previous trading day. Spot premiums/discounts for 304/2B in the Wuxi region ranged from 370-670 yuan/mt. In the spot market, cold-rolled 201/2B coils in both Wuxi and Foshan were quoted at 7,750 yuan/mt; cold-rolled uncut edge 304/2B coils had an average price of 12,850 yuan/mt in Wuxi and 12,850 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; and cold-rolled 430/2B coils were priced at 7,500 yuan/mt in both Wuxi and Foshan.

Currently, the stainless steel market is mired in the traditional consumption off-season, with persistent weakness in downstream demand. Despite widespread losses among enterprises, some steel mills have implemented production cuts. However, due to the large production base in the early stage, current supply remains at a historically high level compared to the same period last year, exacerbating the oversupply in the market. Stainless steel mills and agents are facing mounting pressure to sell, and market pessimism is spreading. Traders are scrambling to sell, pushing stainless steel quotes 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 are less than expected, against the backdrop of weak demand in the off-season, the weak performance of stainless steel prices in the short term is unlikely to reverse.

Nickel Ore:

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

Philippine nickel ore prices held steady 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 precipitation at major nickel ore loading points in the Philippines, the continuous rainy weather during the week significantly impacted the loading progress of nickel mines, which was generally delayed compared to expectations. On the demand side, downstream NPI prices fell again, and domestic NPI smelters continued to suffer severe losses, dampening the sentiment for raw material purchases. The demand side's support for nickel ore prices 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 fuel the reluctance of Philippine mines to budge on prices. Looking ahead, the current price negotiations between upstream and downstream players are evident, coupled with price disturbances from the Indonesian side. In the short term, Philippine nickel ore prices may still hold up well, and domestic enterprises may be forced to choose between high-priced purchases or production cuts.

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 premiums for Indonesia's local laterite nickel ore remained at $26-28/wmt this week.

For saprolite ore, the SMM delivery-to-factory price of Indonesia's local laterite nickel ore (1.6%) was $54.3-57.3/wmt, unchanged WoW. For limonite ore prices, the SMM delivery-to-factory price of Indonesia's local laterite nickel ore (1.3%) 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, heavy rainfall has persisted, severely disrupting operations and 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. On the buyer side, according to SMM's Indonesia Saprolite Ore Inventory Cycle Index, the average inventory at pyrometallurgical 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 supply side, the supply of limonite ore has been stable recently. However, the upcoming rainy season in the Halmahera region is expected to impact the shipment of low-grade laterite nickel ore in the future. On the 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, the demand for cross-island procurement remains, which may further exacerbate the upward pressure on ore prices. Overall, the price of Indonesian limonite ore is expected to hold up well.