[SMM Analysis]High-Grade NPI Prices Continue to Decline Amid Weak End-Use Consumption in Traditional Off-Season

The average price of SMM 10-12% high-grade NPI fell by 9.8 yuan/mtu WoW to 909.6 yuan/mtu (ex-factory, tax included), while the average Indonesian NPI FOB index price dropped by $1.1/mtu WoW to $112.37/mtu. During the traditional off-season, end-use consumption remained weak, and high-grade NPI prices continued to decline this week.

Supply side, as prices approached historical lows, upstream smelters still refrained from offering quotations, and spot orders saw almost no trading volume. However, amid a bearish market sentiment, some traders continued to lower prices to clear inventory, leading to a further decline in both market offers and the trading center.

Demand side, with the onset of the traditional off-season, end-use consumption has been weakening, downstream stainless steel sales faced increasing pressure, and profit margins narrowed further. Meanwhile, stainless steel scrap prices also continued to pull back. Faced with high inventory levels and the growing cost advantage of stainless steel scrap, downstream enterprises adopted a more cautious procurement approach, with a strong wait-and-see sentiment, further reducing market trading volume.

Overall, the high-grade NPI market experienced weak supply and demand this week. The total high-grade NPI inventory across segments increased MoM, the oversupply situation persisted, and with no clear market guidance, high-grade NPI prices are expected to remain under pressure.

This week, both the average price of refined nickel and high-grade NPI declined, with the average discount of high-grade NPI to refined nickel narrowing slightly to 282.4 yuan/mt. High-grade NPI prices are expected to remain under pressure next week, while refined nickel prices are also likely to stay in the doldrums. The average discount of high-grade NPI to refined nickel is expected to expand MoM, and the volume of high-grade NPI converted to high-grade nickel matte is projected to remain stable MoM.

Based on the cash cost of high-grade NPI calculated using ore prices from 25 days ago, smelter profits for high-grade NPI continued to decline this week. Raw material side, ore prices from the Philippines and Indonesia held steady, while auxiliary material prices continued to rise, pushing up the cost of high-grade NPI. At the same time, market activity remained sluggish, and high-grade NPI prices continued to trend lower, putting further pressure on smelter profits. Looking ahead to next week, ore prices are expected to remain firm, auxiliary material costs are likely to stay elevated, and high-grade NPI prices are anticipated to remain under pressure. Smelter losses are expected to worsen further.