Nickel prices rebound, with expectations of a decrease in stainless steel production [SMM Nickel Morning Meeting Summary]

Morning Meeting Summary on July 3

Macro News:

(1) President Xi Jinping presided over the sixth meeting of the Central Financial and Economic Affairs Commission, discussing issues such as advancing the construction of a unified national market and the high-quality development of the marine economy. The meeting emphasized the need to regulate enterprises' low-price and disorderly competition in accordance with laws and regulations, guide enterprises to improve product quality, and promote the orderly exit of backward production capacity.

(2) Trump: No consideration of extending the July 9 tariff negotiation deadline; doubts whether an agreement can be reached with Japan, which may face tariffs of 30% or 35%.

Refined Nickel:

Spot Market:

Today, the SMM 1# refined nickel price is 120,600-123,500 yuan/mt, with an average price of 122,050 yuan/mt, up 600 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 2,400-2,600 yuan/mt, with an average premium of 2,500 yuan/mt, down 100 yuan/mt from the previous trading day. The spot premiums and discounts quotation range for electrodeposited nickel from domestic mainstream brands is -100-300 yuan/mt, with a slight decrease in the upper range.

Futures Market:

The most-traded SHFE nickel contract (2508) showed a fluctuating trend during the night session, rallied after the morning opening, and continued to rise during the trading session. As of the midday close, SHFE nickel was quoted at 121,060 yuan/mt, up 670 yuan/mt, with a gain of 0.56%.

Macro sentiment has improved marginally, and it is expected that nickel prices will fluctuate mainly around the 120,000 yuan/mt level in the short term. 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 lower.

Nickel Sulphate:

On July 2, the SMM battery-grade nickel sulphate index price was 27,192 yuan/mt, and the quotation range for battery-grade nickel sulphate was 27,200-27,600 yuan/mt, with 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 rebounded. 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. From the demand side, precursor plants have reduced their inquiry enthusiasm due to weak demand. Market transactions and inquiry activity remained at a low level this week.

Looking ahead, it is expected that prices will remain stable due to weak downstream demand and the reluctance of nickel salt smelters to budge on prices.

NPI:

On July 2, the SMM 8-12% high-grade NPI average price was 910 yuan/mtu (ex-factory, tax included), down 0.5 yuan/mtu from the previous working day. From the supply side, domestically, the price of nickel ore from the Philippines continues to fluctuate upward, and domestic smelters are facing severe losses, with production drive weakening and expectations of a decline in output. In Indonesia, nickel ore premiums have seen a slight decline, and the losses faced by smelters have eased, but the extent is limited. The 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 prices of stainless steel have not shown a significant boost. There is an expectation of a reduction in stainless steel production, leading to a weakening demand for high-grade NPI. Additionally, as the long-term agreements of downstream steel mills have already met part of the demand, spot order purchases in the market have been sluggish. In the short term, the price of high-grade NPI remains under pressure.

Stainless Steel:

According to SMM on July 2, influenced by the increasingly clear expectations for US Fed interest rate cuts, the SS futures market has once again stopped falling and rebounded, with the intraday high approaching 12,700 yuan/mt. In the spot market, thanks to the boost from the futures market, traders' quotes have generally strengthened in the morning. The relatively low quotes from yesterday have largely disappeared, and market inquiry activities have also warmed up. Despite the relatively small changes in the fundamentals, the cautious wait-and-see sentiment among downstream players has not yet fully dissipated, and the degree of recovery in actual transactions has not been ideal. However, driven by the concessions of some traders, the transaction situation has slightly improved compared to previous days. Currently, despite the low stainless steel prices and the production cuts faced by steel mills due to losses, the in-plant inventory and social inventory of stainless steel mills remain high. The repair of the market supply-demand relationship still requires time, and there will be no significant changes in the fundamentals in the short term. The market is in a stalemate, with spot prices mostly driven by the changes in the futures market.

In the futures market, the most-traded contract 2508 has strengthened and risen. At 10:30 a.m., SS2508 was quoted at 12,635 yuan/mt, up 115 yuan/mt from the previous trading day. The spot premiums and discounts for 304/2B in Wuxi range from 135-335 yuan/mt. In the spot market, the cold-rolled 201/2B coils in Wuxi and Foshan are both quoted at 7,625 yuan/mt; the cold-rolled uncut edge 304/2B coils have an average price of 12,700 yuan/mt in Wuxi and the same in Foshan; the cold-rolled 316L/2B coils are priced at 23,800 yuan/mt in Wuxi and the same in Foshan; the hot-rolled 316L/NO.1 coils are quoted at 23,100 yuan/mt in both Wuxi and Foshan; and the cold-rolled 430/2B coils in Wuxi and Foshan are both priced at 7,250 yuan/mt.

Currently, the stainless steel market is still in the traditional consumption off-season, and downstream demand fails 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 the widespread losses faced by stainless steel mills and the emergence of production cut news in the market, due to the large production base in the early stage, the current market supply remains at a historically high level for the same period. The repair 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 consumption off-season, the de-stocking speed has significantly slowed down, placing significant shipping pressure on stainless steel mills, agents, and traders, thereby limiting the rebound and rise in stainless steel prices. The raw material sector is also under significant pressure. Affected by expectations for production cuts at steel mills, only high-carbon ferrochrome has managed to maintain stable tender prices of steel mill amid production cuts by overseas ferrochrome producers. However, the market retail price has fallen below the tender price. Prices for other raw materials, such as high-grade NPI and stainless steel scrap, have also weakened significantly, further eroding the cost support for stainless steel. The market is now waiting to see how the supply-demand relationship will recover 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 price of Philippine nickel ore remained stable, and domestic transaction prices also held steady temporarily. The CIF price of Philippine laterite nickel ore (NI1.3%) shipped 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, the continuous rainfall during the week significantly impacted the loading progress at nickel mines, causing widespread delays compared to expectations. On the demand side, NPI prices continued to fall this week, and domestic NPI smelters still faced severe losses. The sentiment for raw material purchases was dampened, and the demand-side support for nickel ore prices continued to weaken. Looking ahead, under the influence of multiple factors such as the decline in Indonesia's local nickel ore prices this week, continued losses at downstream smelters, and limited willingness to purchase at high prices, Philippine nickel ore prices may weaken.

Indonesian nickel ore prices changed last week, with saprolite ore prices experiencing a downward trend.

This week, prices for Indonesia's local nickel ore have fallen. In terms of premiums, the mainstream premium for Indonesia's local laterite nickel ore this week dropped to $24-26/wmt. Currently, the SMM delivery-to-factory price for Indonesia's local 1.6% laterite nickel ore is $50.9-54.9/wmt, a decrease of $2.5 WoW. For limonite ore prices, the SMM delivery-to-factory price for Indonesia's local 1.3% laterite nickel ore remained stable at $26-28/wmt, unchanged from last week.

For saprolite ore, on the supply side, Sulawesi and Halmahera, as the main nickel ore mining regions, still faced supply disruptions due to frequent precipitation during the week, with mining and transportation processes at some mines being hindered. 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 continued high operating losses, most Indonesian NPI smelters find it difficult to sustain 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 declined. Looking ahead, there is still downside room for prices in July.

Regarding 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, 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 pose supply risks. Demand side, two major HPAL projects are expected to commence production in H2 this year, which may significantly drive up market demand. Therefore, there is still demand for limonite ore. Looking ahead, the price of limonite ore in Indonesia is more likely to rise than fall.