[SMM Analysis]High Prices Dampen Purchase Willingness, Upward Pressure on High-Grade NPI Prices Gradually Emerges

The average price of SMM 10-12% high-grade NPI rose 7.5 yuan/mtu WoW to 951.1 yuan/mtu (ex-factory, tax included), while the Indonesian NPI FOB index price increased $1.18/mtu WoW to $116.9/mtu. This week, the tender price for NPI from major downstream enterprises rose WoW, driving market prices higher.

Supply side, entering the peak season alongside expectations for US Fed interest rate cuts, smelters maintain seasonal high-price expectations with persistent price resilience psychology, coupled with relatively solid cost lines, keeping upstream offers firm. Demand side, although social inventory of stainless steel continues destocking, finished stainless steel product prices struggle to rise, and stainless steel enterprises show low acceptance of high NPI prices. With relatively ample inventory and low profitability from NPI price increases, almost no fixed-price transactions occurred this week, and market performance remained sluggish. Some downstream stainless steel enterprises expect recent offers to see some corrections. Overall, despite slow growth in end-use consumption during the peak season, stainless steel enterprises' profitability shows no significant improvement, and purchase willingness remains weak. After continuous increases, high-grade NPI prices face growing upward pressure, and are expected to see weaker gains next week.

From the perspective of producing refined nickel through the conversion of NPI to high-grade nickel matte, nickel prices edged lower this week, while high-grade NPI prices continued to rise. The average discount of high-grade NPI to refined nickel narrowed to 261.6 yuan/mt. Refined nickel prices are expected to rise next week amid expectations for US Fed interest rate cuts, while high-grade NPI prices are likely to stabilize. The average discount of high-grade NPI to refined nickel may widen, but the current incentive for converting high-grade NPI to high-grade nickel matte remains weak. The proportion of NPI converted to high-grade nickel matte is expected to decline this month.

Cost side, based on nickel ore prices 25 days ago for calculating the cash cost of high-grade NPI, although most high-grade NPI smelters continued to experience negative margins this week, the overall profit margin saw a slight improvement. Raw material side, ore prices remained stable, but costs for coking coal and coke declined slightly, leading to a slight decrease in the cost line. Meanwhile, high-grade NPI prices continued their seasonal rise, improving the overall profit margin for smelters. Looking ahead to next week, prices for auxiliary materials on the raw material side are expected to remain stable with a slight decline, but there is some expectation of an increase in Philippine ore prices. Against the backdrop of certain pressure on high-grade NPI prices, smelter profits are expected to be constrained again.