In March, stainless steel plants cut production intensively, and the NPI prices fell sharply. Expanded losses forced NPI plants to cut output. Nonetheless, the inflows of Indonesian NPI into China kept NPI in oversupply. With the high cost of stainless steel mills, the prices of NPI have been constantly lowered, which in turn squeezed the prices of nickel ore.
At the end of February, the purchase price of Tsingshan for 304 stainless steel scrap was 12,200 yuan/mt, and then it was lowered to 10,500 yuan/mt at the end of March. Under the expectations of concentrated production reduction at stainless steel mills, the demand for stainless steel scrap has weakened. And the prudent purchase of stainless steel mills has led to weak scrap prices.
In late March, when the prices of NPI fell rapidly, Tsingshan adjusted the bid price for stainless steel scrap many times, lowering prices sharply. Some stainless steel mills have gained profits in April, and they may resume production in a small scale. However, the NPI supply stood high, and production lines in Indonesia maintained normal operation. SMM presumes that the NPI prices will drop on the falling prices of nickel ore shipped from the Philippines and Indonesia. Stainless steel scrap will have cost efficiency over NPI in the short term.
The average discount of high-grade NPI stood at 626.8 yuan/mtu against refined nickel in March, 165 yuan/mtu lower than the previous month. In terms of refined nickel, LME issued a notice that it plans to include nickel powder into delivery products. That, combined with a series of macroeconomic news, caused nickel prices to bottom.
The production of stainless steel was reduced intensively, but the demand from alloy plants strengthened. The overall demand remained stable. Since the profit margin of pure nickel produced with nickel sulphate has been poor after pure nickel prices fell, the commissioning of electrowinning nickel has slowed down. Hence the supply is expected to decrease, limiting the downside room for nickel prices in the near term. At the same time, dragged by the prices of nickel and stainless steel, NPI prices should have large downside room amid an oversupply. The discounts of high-grade NPI against pure nickel will thus continue to shrink.
Both NPI and stainless steel scrap prices saw a large drop in March, and the price drop of the latter outpaced the former. The using proportion of scrap has greatly increased. In March, despite concentrated output cuts at stainless steel, their self-produced NPI output was not reduced, raising the proportion of self-produced NPI. As NPI prices fell sharply in March, buyers that used to purchase high-grade ferronickel turned to buy high-grade Indonesian NPI. Nonetheless, advantages of stainless steel scrap still lowered the use proportion of NPI.
As for stainless steel scrap, in March, due to sufficient market supply, concentrated production reduction of stainless steel mills and higher cost efficiency of NPI, stainless steel scrap prices fell significantly. This raised its overall consumption. In contract, consumption of ferronickel decreased as traders refrained from selling. Since the NPI prices fell by nearly 300 yuan/mtu in March and the stainless steel scrap still has strong cost effectiveness, the proportion of these two raw materials purchased by stainless steel mills may remain high in April. As stainless steel mills purchase pure nickel only as required, there will be limited room for the growth of pure nickel in utilisation. This, combined with the high market share of general nickel, will keep the using proportion of pure nickel at low levels in April.
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