Stainless Steel Demand Remains Sluggish, Short-Term Prices Unlikely to Reverse Decline [SMM Nickel Morning Meeting Summary]

Morning Meeting Summary on June 20

Macro News:

(1) The US Fed's June interest rate meeting - Maintained interest rates unchanged for the fourth consecutive time. The dot plot indicated two interest rate cuts this year, but the number of officials expecting no rate cuts this year rose to seven, and the expected number of rate cuts next year was reduced to one. Powell continued to emphasize uncertainties, stating that the current economic situation is suitable for a wait-and-see approach. He also anticipated tariff-driven inflation increases in the coming months.

(2) The US Treasury's Treasury International Capital (TIC) report showed that foreign investors' holdings of US Treasuries in April were close to record highs. China's holdings of US Treasuries in April were $757 billion, down from $765 billion in March; the UK's holdings were $808 billion, up from $779 billion in March; and Japan's holdings were $1.135 trillion, up from $1.131 trillion in March.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price ranged from 119,050 to 121,600 yuan/mt, with an average price of 120,325 yuan/mt, up 500 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel was 2,500-2,700 yuan/mt, with an average premium of 2,600 yuan/mt, unchanged from the previous trading day. The spot premiums and discounts quotation range for electrodeposited nickel from mainstream domestic brands was 0-400 yuan/mt.

Futures Market:

The most-traded SHFE nickel contract (2507) rebounded during the night session and fluctuated rangebound during the daytime session: It closed up 0.6% at 119,050 yuan/mt during the night session, as the US Fed's interest rate decision was announced, easing macro pressure. During the daytime session, it opened higher and continued to rise, hitting a high of 119,100 yuan/mt during the session, and was temporarily reported at 118,800 yuan/mt as of the midday break, up 0.39%. LME nickel also rebounded synchronously, temporarily reported at $15,095/mt, closing up 1.07% overnight.

In the short term, nickel prices are expected to fluctuate rangebound within the 118,000-123,000 yuan/mt range. 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 on the demand side, the upside room for nickel prices is limited.

Nickel Sulphate:

On June 19, the SMM battery-grade nickel sulphate index price was 27,363 yuan/mt, and the quotation range for battery-grade nickel sulphate was 27,370-27,800 yuan/mt, with the average price falling slightly compared to yesterday.

On the cost side, nickel prices returned to fundamentals and declined slightly this week, leading to a weakening in the production cost of nickel salts. From the demand side, some precursor plants began to inquire about next month's orders this week, but overall demand remained sluggish, and their acceptance of nickel salt prices was low. In terms of supply, some nickel salt smelters had high inventory levels and faced shipping pressure, leading to a loosening of nickel salt 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.

NPI:

As of June 19, the average price of SMM 8-12% high-grade NPI was 924 yuan/mtu (ex-factory, tax included), down 1 yuan/mtu from the previous working day. On the supply side, domestically, the decline in finished product prices has led to expanded losses for smelters, with smelters in east China entering maintenance mode, resulting in reduced 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 relatively 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 high social inventory levels for stainless steel and significant destocking pressure, some stainless steel mills have reduced crude steel production, leading to weaker demand for high-grade NPI. Market inquiry activity has been weak today, and the supply surplus of high-grade NPI has put downward 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 19, SMM reported that today, the SS futures market rose in tandem with the strengthening of SHFE nickel, maintaining operations above 12,500 yuan/mt throughout the day. However, the spot market did not follow the upward trend of the futures market, with spot prices remaining weak. Stainless steel demand continues to be sluggish, with traders generally reporting sluggish trading and difficulties in destocking. This week, social inventory of stainless steel has further accumulated, once again surpassing the 1 million mt mark. Currently, stainless steel prices have fallen to their lowest point in nearly five years, but the mainstream market view does not anticipate a stop in the decline and rebound in the short term. With the recent successive declines in the prices of raw materials such as nickel and chromium, coupled with the still-high stainless steel inventory, prices are expected to remain in the doldrums in the short term.

In the futures market, the most-traded 2508 contract strengthened and rose. At 10:30 a.m., SS2508 was quoted at 12,555 yuan/mt, up 65 yuan/mt from the previous trading day. Spot premiums/discounts for 304/2B in Wuxi ranged from 315-615 yuan/mt. In the spot market, cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,675 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 Wuxi and Foshan; and cold-rolled 430/2B coils were priced at 7,500 yuan/mt in both Wuxi and Foshan.

Currently, the stainless steel market is in the traditional off-season for consumption, with downstream demand remaining persistently sluggish. Despite enterprises generally facing the dilemma of losses, some steel mills have already begun implementing production cuts. However, due to the large production base in the early stage, the current market supply remains at a historically high level for the same period, exacerbating the contradiction of oversupply. The pressure on stainless steel mills, agents, and traders to sell has surged, with both steel mill inventory and social inventory remaining high. Market pessimism has spread widely, and traders are scrambling to sell, leading to a continuous decline in stainless steel quotes. The raw material side is also under significant pressure. Affected by expectations for production cuts at steel mills, the prices of raw materials such as high-grade NPI and high-carbon ferrochrome have also weakened simultaneously, further eroding the cost support for stainless steel. The market generally expects stainless steel mills to introduce further production cut plans to rectify the current supply-demand imbalance.

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 price of Philippine laterite nickel ore (NI1.3%) from the Philippines to China was $44-45/wmt, and the FOB price was $34-36/wmt; the CIF price of NI1.5% was $59-60/wmt, and the FOB price was $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, downstream NPI prices fell again, and domestic NPI smelters continued to face severe losses, dampening the sentiment for raw material purchases. The demand-side 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 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 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 premium 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 WoW, a 3.8% increase. 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, the 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. On the demand 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 front, supply side, the recent supply of limonite ore has been stable, but 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 the expected commissioning of two large-capacity limonite ore projects in H2, subsequent demand for limonite ore is expected to increase. Meanwhile, the demand for cross-island procurement still exists, which may further exacerbate the upward pressure on ore prices. Overall, the prices of Indonesian limonite ore are expected to hold up well.