[SMM Analysis] Supply Contraction Expectations Persisted, MHP and High-Grade Nickel Matte Payable Indicator Fluctuated at Highs This Week

The MHP market was overall tight this week, with nickel and cobalt payables fluctuating at highs. Supply side, Indonesia adjusted the HPM formula, and limonite ore costs had certain upward expectations. Combined with the sulfur supply deficit causing some producers to plan to cut production this month, MHP supply declined and transaction payables were pushed up. Demand side, downstream nickel salt prices did not continue to rise this week, and the risk of losses persisted. Nickel salt smelters had relatively low acceptance of high-priced MHP. However, as downstream ternary demand recovered somewhat, some producers had rigid purchasing needs, supporting the strengthening of MHP nickel payables. Under the influence of tight supply-demand expectations, the market is expected to hold up well in the short term.

The high-grade nickel matte market was also in a pattern of weak supply and demand. Currently, high-grade nickel matte had a clear economic advantage over MHP, but on the supply side, major suppliers had completed long-term contract order signing, and available spot cargo was limited. On the demand side, constrained by downstream production line compatibility, actual consumption capacity was insufficient. Overall purchasing sentiment was weak, trading activity was low, and the payable indicator remained stable.

The international sulfur market saw continued supply tightening, driving prices further higher. Geopolitical tensions in the Middle East showed no signs of easing, with approximately 1 million mt of loaded sulfur still stranded around the Strait of Hormuz. Combined with Turkey's export ban and the extension of Russia's ban, supply continued to tighten. Major Middle Eastern producers significantly raised their official selling prices for May, with official prices in Kuwait, Qatar, and the UAE all hitting multi-year highs. This week, SMM sulfur (CIF Indonesia) quotes rose sharply to $1,100-1,250/mt, indicating an overall upward shift in downstream enterprises' price acceptance range. Although high prices had already suppressed some demand, the magnitude of supply contraction still far exceeded demand shrinkage, making it difficult to reverse the strong price pattern. Sulfur prices are expected to stay high. Continued attention should be paid to geopolitical developments and the recovery of transportation channels going forward.

Nickel prices, after Trump's visit to China this week, non-ferrous metals generally pulled back, and nickel prices were under pressure and in the doldrums. Against the backdrop of rising MHP payables and stable high-grade nickel matte payable indicator, the absolute prices of MHP and high-grade nickel matte declined along with the pullback in nickel prices. In addition, MHP cobalt prices, similar to refined cobalt prices, were basically stable. Overall, the intermediate product market is expected to hold up well in the short term.