High-Nickel Pig Iron Prices Continue to Slide Amidst Persistent Market Weakness

Throughout the week, the average price of SMM 8-12% high-grade nickel pig iron (NPI) was 915.2 RMB per nickel point (ex-factory, including tax), which is a decrease of 10.3 RMB per nickel point compared to the previous week's average price. The Indonesian NPI FOB index price was $111.1 per nickel point, down by $1.2 per nickel point from last week. The price of high-grade nickel pig iron continued a downward trend throughout the week.

From the supply side, within the domestic market, the price of Philippine nickel ore remained firm, with abundant rainfall in the main producing areas during the week. This has kept the CIF price of medium to high-grade nickel ore stable at higher levels, leading to an increased loss for smelters, which may result in a slight decline in production. In Indonesia, the degree of cost inversion for major smelters has intensified. Although there has been a slight decrease in the premium for nickel ores, it has been limited, and some smelters may reduce their production load, which could lead to a slight decline in output.

From the demand side, the stainless steel sector is facing prolonged losses, and top companies might anticipate production cuts. Prices for stainless steel have stabilized after declining, but de-stocking in the social inventory remains unpromising. Stainless steel manufacturers exhibit low enthusiasm for raw material procurement, and with stainless steel prices still fluctuating at low levels, the pressure on high-grade nickel pig iron prices remains significant. Examining the discount of high-grade nickel pig iron to electrolytic nickel, the average discount over the week was 272.9 RMB per nickel point, a widening of 6.25 RMB per nickel point compared to the previous week. The price of high-grade nickel pig iron further declined during the week.

Regarding pure nickel, from a macroeconomic perspective, the Federal Reserve Chairman mentioned that if the U.S. labor market weakens and inflation decreases, it might imply an early rate cut, which strengthens the expectation of rate cuts and benefits the non-ferrous metals market. During the week, six departments including the People's Bank of China and the Ministry of Commerce jointly issued guidelines to strengthen structural monetary policy tools and increase credit support for key areas of service consumption. These macroeconomic policies led to a volatile recovery in nickel prices.

On the cost side, prices for Indonesian wet process and pyrometallurgical nickel ore remained firm, middle product coefficients held steady, and the decline in nickel prices led to an expansion of losses, causing nickel prices to rebound sharply within the week. Prices of high-grade nickel pig iron and electrolytic nickel diverged, with the discount of high-grade nickel pig iron to electrolytic nickel widening. In view of high-grade nickel pig iron, prices may continue to run weakly due to a balance in surplus. For pure nickel, although there was a slight downward adjustment in the premium for nickel ore, it had limited impact on the overall cost center of nickel, and nickel prices might continue to fluctuate within a range.

In summary, it is expected that next week the average discount of high-grade nickel pig iron to electrolytic nickel might widen. From the cost perspective, applying nickel ore prices from 25 days ago to calculate the cash cost of high-grade nickel pig iron, the losses for high-grade nickel pig iron smelters continued to expand during the week. Regarding raw materials, auxiliary material prices showed a downward trend this week, causing some pressure on the auxiliary material cost line for high-grade nickel pig iron. From the perspective of nickel ore, driven by strong demand from Indonesia, prices of Philippine nickel ore continued to run steadily to slightly strong. The deepening cost inversion for smelters this week was mainly due to the continued weakening of finished product prices.

Looking ahead to next week, auxiliary material prices might remain stable under the boost of macroeconomic policies, and the auxiliary material cost line for smelters might hold steady. For nickel ore, with smelters facing deep cost inversion, the upward movement in nickel ore prices might be limited, and prices may remain stable. Next week, finished product prices may continue to decline, further expanding losses for smelters.