Weak stainless steel procurement + production cuts lead to cooling demand for saprolite ore [SMM Nickel Morning Meeting Summary]

6.23 Nickel Morning Meeting Minutes

Macro News:

(1) Today, the People's Bank of China authorized the National Interbank Funding Center to announce the Loan Prime Rate (LPR) for June 20, 2025: the 1-year LPR is 3.0%, and the LPR for loans over 5 years is 3.5%. The LPR quotes for both tenors remained unchanged from the previous month. Industry insiders expect a policy observation period in the short term, with the LPR likely to remain stable. Looking ahead, it is anticipated that the central bank will continue to cut interest rates in H2, and the LPR quotes for both tenors will decline. Additionally, in H2, regulators may push for a more significant reduction in residential mortgage rates by separately guiding the LPR quotes for loans over 5 years downward, among other measures.

(2) The Bank of England, the UK's central bank, announced on the 19th that it would maintain the benchmark interest rate at 4.25%, in line with market expectations. The Bank of England's interest rate decision was based on multiple considerations. On the one hand, the current domestic inflation level remains above the 2% target set by the Bank of England. On the other hand, escalating regional conflicts may disrupt the stability of the international supply chain, leading to an uptick in UK inflation. Under these circumstances, the Bank of England has adopted a cautious stance on monetary policy. However, within the Bank of England, there are growing calls for further interest rate cuts and the adoption of an accommodative monetary policy. In this vote, three out of the nine members of the Monetary Policy Committee supported a 25 basis point interest rate cut.

Refined Nickel:

Spot Market: Today, the SMM 1# refined nickel price is 119,300-121,950 yuan/mt, with an average price of 120,625 yuan/mt, up 300 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 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 is 0-400 yuan/mt.

Futures Market: The most-traded SHFE nickel contract (2507) saw narrowed intraday fluctuations and closed slightly higher in the tail session. The night session closed slightly lower: it closed at 118,820 yuan/mt, down 0.06%; the daytime session rebounded: it opened at 118,930 yuan/mt (up 40 yuan), touched an intraday high of 119,130 yuan/mt, and closed at 118,640 yuan/mt in the afternoon session, down 0.21%. LME nickel stabilized simultaneously, trading at $15,005/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 surplus pressure is difficult to resolve, and coupled with a lack of incremental demand, the upside room for nickel prices is limited.
 

Nickel Sulphate:

As of last Friday, the SMM battery-grade nickel sulphate index price was 27,193 yuan/mt, and the quotation range for battery-grade nickel sulphate was 27,200-27,600 yuan/mt, with the average price declining WoW. Demand side, some precursor producers have already started inquiring about orders this week. However, given that market demand in July has not yet shown a significant recovery trend, the acceptance of current prices by precursor producers remains low. Supply side, influenced by the combination of relatively high finished product inventories at some nickel salt producers and overall weak downstream demand, both the quoted and actual transaction prices of nickel salt producers have shown a downward trend this week. Looking ahead, considering the continued mediocre downstream demand and the weakened bargaining power of some sellers, it is expected that nickel salt prices may weaken further in the short term.

Nickel Pig Iron (NPI):

During the week last week, the average price of SMM 8-12% high-grade NPI was 925.5 yuan/mtu (ex-factory, tax included), down 16.8 yuan/mtu from the weekly average price of the previous week. The price of high-grade NPI continued to trend in the doldrums during the week. Supply side, domestically, influenced by the growth in Indonesian demand, nickel ore prices in the Philippines have fluctuated upward, leading to increased costs for domestic smelters. Amid losses, smelters in east China plan to enter a maintenance period, and it is expected that domestic production may weaken somewhat. In Indonesia, the current premium for saprolite ore is relatively firm, placing a heavy burden on smelters' production costs. However, the economic efficiency of high-grade nickel matte is inferior to that of hydrometallurgy intermediate products. Indonesian RKEF production lines primarily produce high-grade NPI, and it is expected that Indonesian production may continue to increase. Demand side, the futures and spot trends of stainless steel were weak this week, and destocking of social inventory was relatively slow. Stainless steel mills' willingness to purchase raw materials was poor, with weak inquiry activity during the week and a weakening of intended transaction prices. It is expected that the negative feedback from stainless steel will persist in the short term, and the price of high-grade NPI will remain in the doldrums.

Stainless Steel:

From a fundamental perspective, downstream demand for stainless steel remains sluggish, and market confidence is insufficient, with downstream just-in-time procurement mainly in small quantities. Under the pressure of sales, traders have chosen to offer discounts to close deals, leading to a further decline in stainless steel prices, repeatedly breaking the lows of the past five years. Despite this, stainless steel production remains at a relatively high level compared to the same period in history, with a supply-demand imbalance and social inventory continuously climbing, surpassing 1 million mt this week. In addition, the prices of raw materials such as high-grade NPI, high-carbon ferrochrome, and stainless steel scrap have also weakened and fallen, with the cost support for stainless steel declining simultaneously, and the spot market operating in the doldrums. Overall, stainless steel supply is currently in surplus, demand is sluggish, and costs are declining, with fundamentals operating in a weak manner. Although prices have reached low levels, it is still difficult to change the market's pessimistic expectations. The SS futures market also exhibits a backwardation structure, with near-term strength and long-term weakness. In the absence of significant news of production cuts by stainless steel mills in the short term, the market's weak pattern may be difficult to change.

Nickel Ore:

Philippine mine offer prices rise, losses for domestic enterprises expand againLast 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 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 rainfall during the week significantly impacted the loading progress of 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 Indonesia, Philippine nickel ore prices may continue to hold up well in the short term. Domestic enterprises may be forced to choose between purchasing at high prices or cutting production. HPM prices continued to decline, with some price changes in Indonesia this week. Last week, there were changes in the prices of Indonesia's local ore. In terms of premiums, the mainstream premiums for Indonesia's local laterite nickel ore remained at $26-28/wmt this week. Regarding benchmark prices, the HMA price in the second half of June held steady with a slight decline, reaching $15,221/mt, down 1.19% MoM from the previous period. Overall, the prices of saprolite ore decreased this week. The SMM delivery-to-factory price for Indonesia's local laterite nickel ore (1.6%) was in the range of $53.9-56.9/wmt, up $0.4/wmt WoW. For limonite ore prices, the SMM delivery-to-factory price for Indonesia's local laterite nickel ore (1.3%) held steady at $26-28/wmt, unchanged from last week. For saprolite ore, on the supply side, the ongoing rainy season in Sulawesi and Halmahera remains a key constraint on mining and transportation activities. Additionally, although Indonesia's RKAB supplementary quotas began to be approved in H2, there has been no significant increase in quotas so far. Therefore, the slow approval process has exacerbated the tight supply situation for saprolite ore. On the demand side, the SMM NPI price in Indonesia fell again this week, and Indonesian NPI smelters continue to face cost inversions. Moreover, the market procurement sentiment for stainless steel has weakened somewhat due to production cuts at some smelters. However, given the aforementioned tight ore supply situation, Indonesian smelters, despite operating at a loss, have no choice but to passively accept the current high prices to maintain the supply of raw materials needed for production. For limonite ore, on the supply side, although the rainy season in Indonesia continues, there has been no significant tightening in the supply of limonite ore recently. On the demand side, most HPAL projects in the MOROWALI Industrial Park have resumed production, increasing market demand for limonite ore. Additionally, with the expected commissioning of larger HPAL smelting projects in H2, the demand for limonite ore may increase significantly in the future. Looking ahead, the prices of Indonesian limonite ore may hold up well.