High Nickel Pig Iron Prices Continue Downward Trend Amidst Complex Market Dynamics

According to the latest market data, the average price of SMM 8-12% high-grade NPI this week was 925.5 yuan/mtu (ex-factory, tax included), down 16.8 yuan/mtu from last week. Since last week, the price of high-grade NPI has continued to show a weak trend.

From the supply side, both the domestic and international markets have shown their own complex changes. Domestically, the price of nickel ore from the Philippines has remained strong due to rising demand from Indonesia. Meanwhile, domestic smelters are facing pressure from rising costs. Against the backdrop of losses, smelters in east China plan to enter a maintenance period, which may lead to a potential reduction in domestic production.

In Indonesia, the premium for saprolite ore remains firm, and the burden of smelting production costs is relatively heavy. However, the economic viability of high-grade nickel matte is inferior to that of hydrometallurgy intermediate products, leading to the RKEF production lines in Indonesia primarily focusing on high-grade NPI as the dominant product. It is expected that the production of high-grade NPI in Indonesia will maintain its growth trajectory.

On the demand side, the performance of the stainless steel market remained weak this week, with both the broader market and the spot market showing a sluggish trend. The destocking speed of social inventory was slow, and stainless steel mills had weak purchase willingness for raw materials. Affected by this, the market inquiry activity was low this week, and the transaction intention prices were also weak. It is expected that the negative feedback in the stainless steel market will persist in the short term, and the price of high-grade NPI will continue to remain weak.

From the perspective of the price spread between high-grade NPI and refined nickel, the average discount of high-grade NPI to refined nickel this week was 266.65 yuan/mtu, narrowing from the discount of last week by 6.55 yuan/mtu. The continuous weakening of prices is mainly influenced by both macroeconomic and fundamental factors.

Regarding refined nickel, on the macro front, the US Fed decided to cut interest rates by 50 basis points this year, but the pace of future interest rate cuts may slow down, with one 25-basis-point cut expected in 2026 and another in 2027. The weakening of interest rate cut expectations has put pressure on non-ferrous metal varieties. On the fundamentals side, although the supply of refined nickel has decreased, the reduction is relatively small. With the downstream alloy and stainless steel markets entering the off-season, overall demand is weak, leading to a continuous decline in nickel prices. This week, the discount of high-grade NPI against refined nickel narrowed amidst volatile fluctuations, primarily due to the expanded decline in nickel prices. For high-grade NPI, with weak downstream demand and expectations for production cuts, prices are likely to continue weakening. For refined nickel, despite strong cost support, prices may continue to fluctuate in the doldrums due to fundamental pressures and weak macroeconomic expectations. In summary, it is expected that the average discount of high-grade NPI against refined nickel may widen next week.

Cost side, calculating the cash cost of high-grade NPI based on nickel ore prices 25 days ago revealed a deepening trend of losses for smelters this week. From the raw material perspective, auxiliary material prices remained in the doldrums this week, leading to a weakening of the auxiliary material cost line for smelters. However, on the ore side, due to an increase in shipments of Philippine nickel ore to Indonesia, Philippine nickel ore prices remained relatively firm, and the nickel ore cost line for domestic smelters also remained firm. The deepening losses for smelters this week were mainly due to the continued weakening of finished product prices.

It is expected that next week, auxiliary material prices will remain in the doldrums, with the auxiliary material cost line holding steady. Meanwhile, for nickel ore, driven by strong downstream demand, Philippine nickel ore prices are expected to continue to hold up well. However, the continued weakening of finished product prices will further exacerbate the losses for smelters.