Macro policy uncertainty continues, and the price of high-grade NPI is under pressure [SMM Nickel Morning Meeting Summary]

7.11 Morning Meeting Summary

Macro News:

(1) The US Fed's June meeting minutes revealed divided opinions among officials on interest rate cuts, as they held differing views on the impact of tariffs on inflation. The officials were broadly divided into three groups: those advocating for rate cuts within the year but excluding July (mainstream), those favoring no action throughout the year, and those supporting immediate action at the next meeting.

(2) US Commerce Secretary Ruthnick stated plans to meet with Chinese counterparts in early August. The US delegation will also include Treasury Secretary Scott Besant and US Trade Representative Jamison Greer.

Refined Nickel:

Spot Market: Today, SMM 1# refined nickel prices were 119,400-121,800 yuan/mt, with an average price of 120,600 yuan/mt, up 450 yuan/mt from the previous trading day. The mainstream spot premiums for Jinchuan #1 refined nickel ranged from 1,900-2,200 yuan/mt, with an average premium of 2,050 yuan/mt, up 50 yuan/mt from the previous trading day. The spot premiums/discounts for domestic mainstream brands of electrodeposited nickel were in the range of -100 to 300 yuan/mt.

Futures Market: The most-traded SHFE nickel 2508 contract closed down 0.03% at 119,420 yuan/mt during the night session. In the daytime session, it opened lower and fluctuated. By midday, SHFE nickel was quoted at 119,590 yuan/mt, up 0.11%. Before the implementation of August tariffs, risk aversion sentiment persisted, and macro policy dynamics remained the dominant variable. The price center faced downward risks, and short-term nickel prices are expected to remain in the doldrums, with a price range of 118,000-123,000 yuan/mt.

Nickel Sulphate:

On July 10, the SMM battery-grade nickel sulphate index price was 27,227 yuan/mt, with a quotation range of 27,200-27,640 yuan/mt, and the average price remained unchanged from the previous day. Cost side, the US Fed's latest meeting did not reach a consensus on the impact of global tariffs on the US economy, and macro policy uncertainty persisted, keeping LME nickel prices in the doldrums. Overall, the immediate costs of nickel salts are expected to remain low. Supply side, nickel salt smelter quotations remained generally unchanged from the previous day. Recently, some producers raised their quotations, but weak buyer demand led to limited transactions, with overall inventory and production schedules at low levels. Demand side, although some producers showed purchasing intentions recently, overall buying enthusiasm remained low. After completing stockpiling for this month at the end of last month, most buyers adopted a wait-and-see approach. Looking ahead, with production costs falling and downstream demand remaining weak, although nickel salt smelters continue to refuse to budge on prices, nickel salt prices are expected to remain stable at low levels in the short term.

Nickel Pig Iron (NPI):

On July 10, the SMM 8-12% high-grade NPI average price was 905 yuan/mtu (ex-factory, tax included), unchanged from the previous working day. Supply side, domestically, Philippine nickel ore prices remained firm, and smelters continued to face losses, keeping overall production at low levels. In Indonesia, premiums for saprolite ore weakened slightly, and smelter cost lines loosened. However, with some smelters facing expanded losses, maintenance expectations emerged, and overall production may weaken slightly. Demand side, stainless steel entered the traditional consumption off-season, with limited downstream demand improvement. Social inventory remained high, and stainless steel production may decline, weakening demand for high-grade NPI. In the short term, high-grade NPI prices are expected to remain under pressure.

Stainless Steel:

On July 10, SMM reported that SS futures prices rose strongly today, driven by overall gains in the futures market, approaching the 12,900 yuan/mt mark before closing. In the spot market, prices remained stable in the morning, maintaining previous levels with no significant fluctuations in transactions. In the afternoon, as futures prices continued to strengthen, traders became more active in restocking, market inquiries increased, and quotations rose slightly. This week, stainless steel social inventory rose again, up 1.31% WoW to 990,800 mt, with significant pressure on market sales and transactions.

In the futures market, the most-traded SS 2508 contract strengthened and rose. At 10:30 a.m., SS 2508 was quoted at 12,825 yuan/mt, up 80 yuan/mt from the previous trading day. In Wuxi, the 304/2B spot premiums/discounts ranged from -55 to 145 yuan/mt. In the spot market, cold-rolled 201/2B coils in Wuxi and Foshan were both quoted at 7,500 yuan/mt. Cold-rolled uncut edge 304/2B coils had an average price of 12,700 yuan/mt in both Wuxi and Foshan. Cold-rolled 316L/2B coils were quoted at 23,700 yuan/mt in both regions, while hot-rolled 316L/NO.1 coils were quoted at 23,150 yuan/mt. Cold-rolled 430/2B coils were quoted at 7,100 yuan/mt in both Wuxi and Foshan.

Although SS futures prices stopped falling and rebounded, strengthening further, the fundamentals of the stainless steel spot market have not shown a significant reversal. The market remains in the traditional consumption off-season, with high summer temperatures further weakening some downstream demand. Earlier news of production cuts at steel mills boosted market confidence, slightly improving weak transaction conditions. However, stainless steel inventory pressure remains significant. In-plant inventory, forward inventory, and social inventory at stainless steel mills are all at relatively high levels. The slow destocking pace during the off-season has delayed the recovery of the supply-demand relationship. Due to expectations for production cuts at stainless steel mills, high-grade NPI procurement prices have further declined, weakening cost support for stainless steel. In summary, the current stainless steel market faces multiple pressures, including high inventory, weak demand, and reduced cost support. The recovery of the supply-demand relationship will take time.

Nickel Ore:

Philippine nickel ore prices declined as smelters faced losses, and downstream acceptance of high-priced nickel ore remained limited.

Last week, Philippine medium-grade nickel ore prices fell. The CIF price of Philippine laterite nickel ore (NI 1.3%) to China was $45-47/wmt, and the FOB price was $36-38/wmt. The CIF price of NI 1.5% was $58-61/wmt, and the FOB price was $51-53/wmt. Supply side, rainfall in the southern main production areas of the Philippines slightly decreased compared to last week. Rainfall in southern Palawan remained unchanged, while the eastern Davao region experienced almost no rainfall. The main rainfall was concentrated in the Zambales region. Overall, rainfall had no significant impact on shipments. Nickel ore supply increased. As of July 4, China's nickel ore port inventory rose to 6.63 million wmt, with earlier shipments arriving at ports, leading to increased inventory. Demand side, NPI prices continued to decline this week. Domestic NPI smelters faced severe losses, dampening raw material procurement sentiment, and weakening support for nickel ore prices from the demand side. Looking ahead, with Indonesian local nickel ore prices declining last week, continued losses at downstream smelters, limited willingness to purchase high-priced ore, and increased port inventory, Philippine nickel ore prices are expected to continue weakening.

Indonesian Benchmark Prices Declined in Early July, Saprolite Ore Faces Downward Trend

Indonesian nickel ore prices fell again last week. Premiums, the mainstream premiums for Indonesia's local laterite nickel ore remained at $24-26/wmt last week. Benchmark prices, the HMA price for the first half of July fell slightly to 14,943 yuan/mt, down 1.83% MoM. SMM's delivery-to-factory price for Indonesia's local laterite nickel ore (NI 1.6%) was $50.4-54.4/wmt, down $0.5 from last week, a decrease of 0.9%. For limonite ore prices, SMM's delivery-to-factory price for Indonesia's local laterite nickel ore (NI 1.3%) remained stable at $26-28/wmt, unchanged from last week.

Saprolite Ore: Supply side, mining and transportation operations in major nickel ore areas on Sulawesi and Halmahera islands in Indonesia continued to be disrupted by persistent rainfall this week. Nevertheless, progress was made in the approval of new quotas and revised RKAB quotas. RKAB approvals are expected to continue advancing in July and August. As a result, nickel ore supply is expected to increase further. Demand side, most Indonesian NPI smelters continued to struggle with high nickel ore prices. Some smelters faced losses, and even production cuts, leading to reduced procurement demand. Overall, despite tight nickel ore supply in Indonesia due to the rainy season, downward pressure from NPI smelters has made it difficult for prices to remain high. Looking ahead, saprolite ore prices are expected to remain weak.

Limonite Ore: Supply side, current limonite ore supply remains relatively stable, meeting current market demand. Additionally, significant progress in RKAB approvals is expected in the coming months, potentially driving further supply increases. Demand side, MHP project production remains normal, with stable demand for limonite ore. In the long term, with potential progress in supplementary RKAB quota approvals, limonite ore prices are expected to remain weak.