The supply-demand relationship of stainless steel still needs to be improved, and the nickel price center may move downward [SMM Nickel Morning Meeting Summary]

7.2 Morning Meeting Summary

Macro News:

(1) Rafael Bostic, President of the Federal Reserve Bank of Atlanta in the US, reiterated on Monday that he still believes the US Fed will lower the target benchmark interest rate once this year, while indicating that there is currently no urgency to take action, as there remains significant uncertainty regarding the impact of trade tariffs on the inflation dynamics of the US economy. When discussing the expectation of one interest rate cut in 2025, Bostic expressed this view at an event hosted by Market News International. He also noted plans for three interest rate cuts next year.

(2) Data released on the 30th by the Service Industry Survey Center of the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing showed that in June, the manufacturing PMI, non-manufacturing business activity index, and composite PMI output index were 49.7%, 50.5%, and 50.7% respectively, increasing by 0.2, 0.2, and 0.3 percentage points from the previous month. China's economic prosperity level generally maintained expansion. In June, China's manufacturing PMI was 49.7%, rising for two consecutive months. The manufacturing prosperity level continued to improve, with the prosperity scope expanding, and the new orders index once again rising above 50%.

Refined Nickel:

Spot Market:

Today, the SMM1# refined nickel price is 120,000-122,900 yuan/mt, with an average price of 121,450 yuan/mt, down 800 yuan/mt from the previous trading day. The mainstream spot premiums 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 domestic mainstream brands is -100-400 yuan/mt.

Futures Market:

The most-traded SHFE nickel contract (2508) showed a volatile downward trend today. As of the midday close, SHFE nickel was quoted at 120,340 yuan/mt, down 640 yuan/mt, or 0.5%.

Macro sentiment has improved marginally, and in the short term, nickel prices are expected to oscillate mainly around the 120,000 yuan/mt level. However, with downstream demand currently in the off-season, the long-term surplus pattern of nickel is difficult to reverse, and the price center may gradually move downward.

Nickel Sulphate:

On July 1st, the SMM battery-grade nickel sulphate index price was 27,190 yuan/mt, with the quotation range for battery-grade nickel sulphate being 27,200-27,600 yuan/mt, and the average price remaining stable compared to yesterday.

On the cost side, influenced by the general rise in non-ferrous metals and the rebound from oversold conditions, LME nickel prices have risen. Overall, the immediate production cost of nickel salts has increased. From the supply side, some nickel salt smelters have halted production for maintenance due to losses, while some have maintained stable quotations. Demand side, precursor manufacturers have seen a decline in their enthusiasm for inquiries due to weak demand. Market transactions and inquiry activity remained at a low level this week.

Looking ahead, it is expected that sentiment will drive nickel salt prices higher, but the extent of the increase will still be constrained by weak downstream demand.

NPI:

On July 1, SMM reported that the average price of 8-12% high-grade NPI was 910.5 yuan/mtu (ex-factory, tax included), down 2 yuan/mtu from the previous working day. Supply side, domestically, nickel ore prices in the Philippines continued to fluctuate upward, leading to severe losses for domestic smelters. With weakened production incentives, there is an expectation of a decline in production. In Indonesia, nickel ore premiums have seen a slight decrease, alleviating the losses for smelters but to a limited extent. Low finished product prices have led some smelters to reduce their production loads, resulting in a weakening of production. Demand side, stainless steel has entered the traditional consumption off-season, and the spot price of stainless steel has not seen a significant boost. There is an expectation of a decrease in stainless steel production, leading to weaker demand for high-grade NPI. Additionally, with long-term agreements from downstream steel mills already meeting part of the demand, spot order purchases in the market have been sluggish. In the short term, high-grade NPI prices are still under pressure.

Stainless Steel:

On July 1, SMM reported that the overall SS futures market showed a weakening trend, with prices pulling back and even falling below 12,500 yuan/mt during the session. In the spot market, as the futures market stopped rising and turned downward in the past two days, the news of production cuts by stainless steel mills has been largely absorbed by the market. The weak downstream demand for stainless steel spot has once again become prominent, leading to a decline in transactions and a slight drop in spot quotes. There was news in the morning that steel mills had reduced the prices of 200-series stainless steel, but the price cut did not significantly boost transactions, and the market remained sluggish. Despite the current low prices of stainless steel and the continuous decline in planned production, the supply-demand imbalance has not been fundamentally reversed amid persistent weak demand, and it will still take time for market confidence to recover.

In the futures market, the most-traded contract 2508 fell. At 10:30 a.m., SS2508 was quoted at 12,520 yuan/mt, down 130 yuan/mt from the previous trading day. The spot premiums and discounts for 304/2B stainless steel in Wuxi were in the range of 250-450 yuan/mt. In the spot market, the cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,625 yuan/mt; the cold-rolled uncut edge 304/2B coils had an average price of 12,700 yuan/mt in Wuxi and 12,700 yuan/mt in Foshan; the cold-rolled 316L/2B coils were priced at 23,800 yuan/mt in Wuxi and 23,800 yuan/mt in Foshan; the hot-rolled 316L/NO.1 coils were both quoted at 23,100 yuan/mt in Wuxi and Foshan; and the cold-rolled 430/2B coils were both priced at 7,300 yuan/mt in Wuxi and Foshan.

Currently, the stainless steel market is still in the traditional consumption off-season, with downstream demand failing to match the current supply level. Additionally, uncertainties such as US tariffs remain significant, leading to a strong wait-and-see sentiment among downstream players. Despite stainless steel mills generally facing losses and market news of production cuts, due to the large production base in the early stage, current market supply remains at a historically high level for the same period, and the restoration of the supply-demand relationship still requires time. Both steel mill inventory and social inventory are at relatively high levels. Against the backdrop of the off-season, the de-stocking speed has slowed down significantly, putting significant pressure on stainless steel mills, agents, and traders to ship goods, thereby limiting the rebound and rise of stainless steel prices. The raw material side also faces tremendous pressure. Affected by expectations for production cuts at steel mills, only high-carbon ferrochrome has been able to maintain stable tender prices amid production cuts by overseas ferrochrome producers, but market retail prices have fallen below tender prices. The prices of other raw materials such as high-grade NPI and stainless steel scrap have also weakened significantly, further weakening the cost support for stainless steel. The market is waiting to see the restoration of the supply-demand relationship after production cuts by stainless steel mills.

Nickel Ore:

Philippine nickel ore prices remain stable. Amid smelter losses, downstream acceptance of high-priced nickel ore is limited.

Last week, the FOB prices of Philippine nickel ore remained stable, and domestic transaction prices temporarily held steady. The CIF price of Philippine 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 NI1.5% was $59-61/wmt, and the FOB price was $52-53/wmt. In terms of supply and demand, on the supply side, although there was precipitation at major nickel ore loading points in the Philippines, continuous rainfall during the week significantly affected the loading progress of nickel mines, with loading progress generally delayed compared to expectations. On the demand side, NPI prices continued to fall this week, and domestic NPI smelters still suffered 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, continuous losses at downstream smelters, and limited willingness to purchase at high prices, Philippine nickel ore prices may weaken.

Last week, Indonesian nickel ore prices experienced some changes, with saprolite ore prices showing a downward trend.

This week, prices of Indonesia's local nickel ore have fallen. In terms of premiums, the mainstream premium for Indonesia's local laterite nickel ore this week has dropped to $24-26/wmt. Currently, the SMM delivery-to-factory price of Indonesia's local 1.6% laterite nickel ore 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 1.3% laterite nickel ore has remained stable at $26-28/wmt, the same as last week.

For saprolite ore, supply side, as Sulawesi and Halmahera are the main nickel ore mining regions, the supply situation during the week was still disrupted by frequent precipitation, with the mining and transportation processes of some mines hindered. Nevertheless, the approval of some supplementary RKAB quotas may be expected to progress. After entering July, the progress of RKAB approvals may accelerate. Demand side, due to persistent 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 price in the first half of July has already fallen. Looking ahead, there is still downside room for prices in July.

For limonite ore, supply side, due to the support of several months' inventory accumulated after the QMB accident in March, the current supply of limonite ore in Sulawesi remains relatively stable, capable of meeting current market demand. However, it should be noted that the rainy season in Sulawesi and Halmahera continues, and if it persists into Q3, it may trigger supply risks. Demand side, two major HPAL projects are expected to commence production in the second half of this year, which may significantly drive up 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.