Prices of High-grade NPI And Refined Nickel Are Under Pressure, With Market Showing Signs Of Adjustment

This week, both the high-grade NPI and refined nickel markets remained in the doldrums, though some indicators showed marginal changes, reflecting complex adjustments in the market structure.

For high-grade NPI prices, the weekly average price of SMM8-12% high-grade NPI was reported at 905.3 yuan/mtu (ex-factory, tax included), down 4.5 yuan/mtu WoW. The Indonesia NPI FOB index price stood at $110.4/mtu, down $0.5/mtu WoW. Although prices continued their downward trend, the pace of decline narrowed, indicating weakening bearish momentum and intensifying tug-of-war between longs and shorts.

Supply side, the domestic market saw both cost easing and sluggish production. The CIF price of Philippine nickel ore dropped slightly, loosening the cost line for domestic smelters and alleviating cost pressure to some extent. However, domestic smelters remained deeply mired in heavy losses, severely dampening production motivation and keeping output at low levels.

The supply situation in Indonesia was equally concerning. The domestic trade premium for saprolite ore weakened, reflecting subtle shifts in local supply-demand dynamics. Most smelters were still operating at a loss, prompting production cuts to minimize losses, with capacity utilization rates at some plants falling below 50%. Notably, some convertible production lines began switching to high-grade nickel matte, which would further divert NPI output, potentially leading to a downward trend in Indonesia's NPI production.

Demand side, stainless steel performance significantly influenced high-grade NPI demand. Stainless steel prices stabilized this week, with a relatively ideal rebound in the futures market, offering some optimism. However, spot prices remained low, keeping steel mills cautious in procurement—mainly just-in-time purchases at lower prices than the previous period. Overall, stainless steel lacked upward momentum, failing to provide strong support for high-grade NPI. Against the backdrop of raw material price pressure, high-grade NPI prices are likely to remain in the doldrums. From the perspective of the discounts for high-grade NPI and refined nickel, high-grade NPI averaged a discount of 303.5 yuan per mtu against refined nickel during the week, narrowing by 1.8 yuan per mtu WoW. This change indicates subtle adjustments in the price relationship between the two, with high-grade NPI prices continuing to trend in the doldrums but showing a reduced weakness relative to refined nickel.

In the refined nickel market, this week also saw sluggish performance. From a macro perspective, the June non-farm payrolls data showed a strong performance, with an increase of 147,000 jobs, exceeding market expectations of 110,000, and the unemployment rate dropping to 4.1%. Following the release of this data, market expectations for an early interest rate cut by the US Fed cooled rapidly, with the probability of a September rate cut sliding to around 80%. Affected by this, the US dollar index gained support, putting general pressure on non-ferrous metals, and refined nickel prices exhibited a fluctuating trend in the doldrums during the week.

On the cost side, the absolute price of Indonesian pyrometallurgical nickel ore began to weaken, directly leading to a downward shift in the upper cost boundary for high-cost refined nickel, exerting a bearish impact on refined nickel prices. From the perspective of the high-grade NPI market, short-term supply and demand remain in a surplus zone, with prices under significant pressure. Meanwhile, the loosening of the cost line further exacerbated the downward pressure on prices. For refined nickel itself, downstream demand has entered the traditional off-season, exacerbating its weak fundamental performance. Prices are expected to remain in a fluctuating trend in the doldrums. Overall, it is anticipated that the average discount of high-grade NPI against refined nickel will continue to narrow next week.

Delving deeper into the cost side, calculating the cash cost of high-grade NPI based on nickel ore prices 25 days ago, the losses for high-grade NPI smelters deepened further this week. On the raw material side, auxiliary material prices stabilized after experiencing previous declines this week. Driven by macro sentiment, prices of ferrous metals began to rebound and recover after a prolonged period of weakness, leading to a generally stable with slight rise trend in the auxiliary material cost line for smelters.

On the ore side, Philippine nickel ore prices are expected to start a downward trend amid weakening downstream acceptance. The deepening of smelters' losses this week was mainly due to the continued weakness in finished product prices. It is anticipated that next week, auxiliary material prices will continue to recover under the intervention of the "anti-rat race" competition policy, and the auxiliary material cost line for smelters will continue to hold up well. For nickel ore, under the influence of loosening nickel ore prices, the nickel ore cost line for smelters may decline. Overall, it is expected that the losses for smelters will be alleviated to a certain extent next week.