Philippine nickel ore supply affected by rainfall, with weakening demand [SMM Nickel Morning Meeting Summary]

6.3 Nickel Morning Meeting Summary

Macro News:

(1) Middle East Situation - ① Iranian Foreign Minister: Currently, Iran has no plans to restart nuclear negotiations. ③ Iran's Supreme Leader Khamenei made his first appearance after the ceasefire, stating that the US attack on nuclear facilities had "little effect" and that Trump was putting on a show. ④ CNN: The US plans to discuss easing sanctions on Iran to bring it back to nuclear negotiations.

(2) US Fed - ① Barkin: The estimated neutral interest rate may rise slowly over time; tariffs will start to push up inflation. ② Goolsbee: If inflation remains within the 2% range and uncertainties are resolved, the Fed will embark on a path of interest rate cuts; Trump's premature announcement of Powell's successor will have no impact on the FOMC. ③ Daly: An autumn interest rate cut looks promising. ④ Collins: A July interest rate cut may be premature.

Refined Nickel:

Spot Market: Today, the SMM #1 refined nickel price is 120,900-123,700 yuan/mt, with an average price of 122,300 yuan/mt, up 650 yuan/mt from the previous trading day. The quotation range for the mainstream spot premiums of Jinchuan #1 refined nickel is 2,700-2,900 yuan/mt, with an average premium of 2,800 yuan/mt, down 100 yuan/mt from the previous trading day. The quotation range for spot premiums and discounts of electrodeposited nickel from mainstream domestic brands is 0-400 yuan/mt.

Futures Market:
 

The most-traded SHFE nickel contract (2508) oscillated mainly above 120,000 yuan/mt today. As of the midday close, SHFE nickel was quoted at 120,660 yuan/mt, up 880 yuan/mt, with a gain of 0.73%.

With the easing of geopolitical risks and the dissipation of risk-averse sentiment, six departments, including the central bank, jointly launched consumption stimulus measures to boost market confidence. Nickel prices have rebounded recently. In the medium and long-term, the nickel surplus pattern is difficult to reverse, and the rebound space is expected to be limited.

Nickel Sulphate:

As of last Friday, the SMM battery-grade nickel sulphate index price was 27,194 yuan/mt. The quotation range for battery-grade nickel sulphate was 27,200-27,600 yuan/mt, with an average price holding steady WoW. Demand side, there has been no significant increase in demand from downstream industries, leading to a continued low level of inquiry enthusiasm for nickel salts from precursor producers this week. Meanwhile, the acceptability of nickel salt prices by precursor producers has also remained at a low level. Supply side, affected by high raw material costs, some nickel salt producers have implemented production shutdowns for maintenance. Coupled with weak downstream demand, nickel salt producers' quotations have generally been in the doldrums, facing significant upward pressure on prices. Looking ahead to the subsequent market, given the continued sluggishness of downstream demand, it is expected that nickel salt prices may further weaken in the short term.

NPI:

The SMM 8-12% high-grade NPI average price fell 16.8 yuan/mtu WoW, and the Indonesia NPI FOB index also declined WoW. The overall high-grade NPI market is weak, with prices continuing to decline. Supply side, domestically, the strong performance of Philippine nickel ore prices has led to severe losses for domestic smelters, with some reducing production loads and expecting a decline in output. In Indonesia, the pyrometallurgical nickel ore premiums in the domestic trade have remained firm, but the decline in finished product prices has led to continued losses for smelters. Despite the current losses in pyrometallurgical high-grade nickel matte, due to weaker downstream demand for high-grade NPI, there may be a slight increase in output. The stainless steel spot market is weak, with prices continuously testing historical lows. Mainstream steel mills have weak demand for raw material procurement, and with the expanding economic advantage of stainless steel scrap as a raw material, the demand for high-grade NPI has further weakened. In summary, in the short term, high-grade NPI prices are expected to continue their weak performance.

Stainless Steel:

Last week, the stainless steel spot market experienced fluctuations of falling first and then rising. At the beginning of the week, affected by the low-priced transactions of high-grade NPI and the downward adjustment of stainless steel mills' plate prices, stainless steel prices fell to their lowest point in nearly five years, with the base price of some 304 cold-rolled uncut edge steel coils dropping to 12,100 yuan/mt. Subsequently, the market received news of production cuts from a large stainless steel mill, which ended the continuous decline in stainless steel spot prices over the past two months and achieved a bottom-out rebound. The market inquiry atmosphere warmed up, and transaction conditions improved slightly. Social inventory also declined during the week, falling below 1 million mt. In addition, when steel mills' plate prices were at a low level at the beginning of the week, traders were more active in purchasing futures orders, which alleviated the steel mills' shipping pressure to a certain extent. Despite enterprises generally facing the dilemma of losses, market confidence has warmed up, prices have risen, inquiry activity has increased, and transactions of low-priced goods have improved. However, the overall market price is still at a low level, and the market still has doubts about the actual production cuts of steel mills. The current price is still in a tentative upward stage. The raw material side is also under significant pressure, with prices of raw materials such as high-grade NPI and stainless steel scrap weakening simultaneously, further weakening the cost support for stainless steel. The market is waiting for the repair of the supply-demand relationship after stainless steel mills' production cuts.

Nickel Ore:

Philippine nickel ore prices hold steady. Under smelter losses, downstream acceptance of high-priced nickel ore is limited. Last week, the FOB prices of nickel ore from the Philippines remained stable, and domestic transaction prices also held steady temporarily. The CIF price of laterite nickel ore (NI1.3%) from the Philippines to China was $46-47/wmt, and the FOB price was $37-38/wmt. The CIF price of laterite nickel ore (NI1.5%) was $59-61/wmt, and the FOB price was $52-53/wmt. In terms of supply and demand, in terms of supply, 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, and the loading progress was generally delayed compared to expectations. In terms of demand, the NPI price continued to fall this week, and domestic NPI smelters were still facing severe losses. The sentiment for raw material purchases was frustrated, and the support for nickel ore prices from the demand side continued to weaken. Looking ahead, under the influence of multiple factors such as the decline in Indonesia's local nickel ore prices this week, the continuous losses of downstream smelters, and the limited willingness to purchase at high prices, the prices of nickel ore from the Philippines may weaken. The prices of nickel ore in Indonesia changed this week, with saprolite ore prices showing a downward trend. The prices of Indonesia's local nickel ore have fallen this week. In terms of premiums, the mainstream premium for Indonesia's local laterite nickel ore fell to $24-26/wmt this week. Currently, the SMM delivery-to-factory price of Indonesia's local laterite nickel ore (1.6%) is $50.9-54.9/wmt, a decrease of $2.5 WoW. In terms of limonite ore prices, the SMM delivery-to-factory price of Indonesia's local laterite nickel ore (1.3%) remained stable at $26-28/wmt, the same as last week. In terms of saprolite ore, from the supply side, Sulawesi and Halmahera, as the major nickel ore mining regions, still faced disruptions in supply conditions during the week due to frequent precipitation, which hindered the mining and transportation processes of some mines. Nevertheless, the approval of some supplementary RKAB quotas may be expected to progress. After entering July, the RKAB approval progress may accelerate. From the demand side, due to continuous high operating losses, most Indonesian NPI smelters find it difficult to bear the continuous high premiums. Overall, although Indonesia's saprolite ore is in a tight state, downstream enterprises continue to exert pressure to reduce premiums to ensure affordable nickel ore purchases. The HMA prices in the first half of July have already fallen. Looking ahead, there is still downside room for prices in July. In terms of limonite ore, from the supply side, due to the support of several months of inventory accumulated after the QMB accident in March, the current supply of limonite ore in Sulawesi remains relatively stable, meeting current market demand. However, it should be noted that the rainy season in Sulawesi and Halmahera continues, and if it extends into Q3, it may trigger supply risks. From the demand side, two major HPAL projects are expected to commence production in H2 this year, which may significantly boost market demand. Therefore, there is still demand for limonite ore. Looking ahead, the prices of limonite ore in Indonesia are more likely to rise than fall.