SMM Nickel Market Morning Comment Fully (Apr 15)

Nickel prices surged last week, reaching 142,000 yuan/mt. Despite a slight dip on last Thursday due to macro factors, nickel prices closed on last Friday with a 3.6% increase WoW. Last Wednesday night, the Federal Reserve released the March CPI. It raised up by 3.5% YoY, with the growth being 0.3 percentage point higher than in February. It went beyond what the market expected and was the biggest jump in six months. It went up by 0.4% MoM, the same as February. Surprise high inflation data shook market confidence for a June rate cut by the Fed. This led to a hit on the non-ferrous sector, especially nickel, which fell hard because of its weak fundamentals. Fundamentally, refined nickel production is going strong despite a few smelters taking a break in March. National output keeps climbing because nickel prices were high in March and new production capacity has been steadily coming online since the start of the year. It looks like companies that cut back before are gearing up to ramp up production again, which will boost nickel plate supply even more. Demand side, downstream sectors may have entered a phase of essential purchasing, with a slight decrease. This suggests that some plants began to accept high-priced raw materials, especially special alloy steels. In summary, nickel prices are driven by overall market sentiments. Though they dipped last week after US CPI data disappointed, the anticipation of non-ferrous metals going up hints that SHFE nickel will probably stay strong this week.

Nickel: Last week, nickel prices generally trended strong, reaching as high as 142,000 yuan/mt at one point. Although there was a slight pullback due to macroeconomic influences, nickel prices still closed up by 3.6% compared to the previous week. The pullback in nickel prices last Thursday was mainly influenced by macroeconomic news. On Wednesday evening, the US Federal Reserve announced that the March US Consumer Price Index (CPI) rose by 3.5% year-on-year, an increase of 0.3 percentage points from February, exceeding market expectations and marking the largest increase in six months. On a month-on-month basis, the CPI increased by 0.4%, unchanged from February. The unexpectedly high inflation data significantly undermined market confidence in the Fed's interest rate cut in June. As a result, the non-ferrous sector experienced a collective decline in response to market sentiment disturbances. Nickel, due to its poor performance in fundamentals, became one of the more significantly declining varieties among non-ferrous metals. Fundamentally, refined nickel capacity operating rate remains high, with stable production growth. Despite some smelters being affected by equipment maintenance in March, the national nickel plate output continued to grow. This is mainly due to the high nickel prices in March, the continuous release of newly added nickel plate capacity since the beginning of the year, and the reduction in output not keeping up with the production growth within the month. According to SMM research, it is expected that nickel plate supply growth will accelerate further within the month, as previously reduced production and shutdown nickel enterprises are expected to resume production and increase output. Looking at demand, downstream transactions for pure nickel remained sluggish last week. However, compared to the same level of nickel prices in March, downstream buyers may have entered the stage of just-in-time purchases. Although purchase volumes have decreased compared to purchases before the Chinese New Year, this indirectly reflects that some downstream buyers have started to accept high-priced raw materials. Among them, the main purchasing terminals are still in the special alloy sector. In summary, the current trend of nickel prices depends on the feedback of macroeconomic sentiment. Despite the interruption of the upward trend due to the unfavorable US CPI data last week, with the expectation of a collective rise in non-ferrous metals, it is predicted that the Shanghai nickel main contract will still operate with a bias towards strength this week.

Nickel Sulfate: On April 12th, the SMM battery-grade nickel sulfate index price was 30,338 yuan/mt, down by 212 yuan/mt from the previous week, with battery-grade nickel sulfate prices ranging from 30,200 to 30,500 yuan/mt, down by 250 yuan/mt on average from the previous week. This week, nickel sulfate prices saw a slight decline, with relatively light trading volume. In March, the output of nickel salts was 34,000 metal tons, a month-on-month increase of 32.71% but a year-on-year decrease of 7.83%. In April, the output of nickel salts was 35,900 metal tons, a month-on-month increase of 5.39% and a year-on-year increase of 18.88%. The precursor output in March was 77,600 tons, a month-on-month increase of 27% and a year-on-year increase of 43%. In April, it is expected to be 80,300 tons, a month-on-month increase of 4% and a year-on-year increase of 50%. Corresponding nickel consumption in March was 35,400 metal tons, a month-on-month increase of 126%, and in April, it is expected to be 36,600 metal tons, a month-on-month increase of 103%. Other demand remained stable. In March, there was a deficit of 2,300 tons of nickel, which narrowed in April but the tight situation did not reverse. It is expected that there will be a deficit of 600 tons of nickel in April. The tension between supply and demand for nickel sulfate is gradually easing, with profits hovering around the cost line. However, due to the continuous losses in downstream precursors, this may exert pressure on nickel sulfate prices. The price of pure nickel is supported by macroeconomic factors and the delayed implementation of the Indonesian nickel ore export ban, leading to a relatively strong trend. Therefore, there is uncertainty in the April raw material costs, which may put pressure on nickel sulfate prices overall. Subsequent nickel sulfate prices may fluctuate with changes in costs, and the limited space for narrowing profits due to the partially unreversed tight supply and demand situation.

Ferronickel: Last week, the average price of SMM 8-12% high nickel pig iron was 932.5 yuan/mtu (factory tax included), up by 2.5 yuan/mtu from the previous week, with ferronickel prices bottoming out and trending upwards during the week. From the supply side, according to SMM's production capacity survey, in April, domestic ferronickel smelting enterprises were less affected by profit inversion, with some small and medium-sized enterprises halting production. However, integrated steel mills' output, although declining, was still maintained. The circulation volume of domestic ferronickel decreased. In Indonesia, in April, Huabo Industrial Park's nickel iron production line was put into operation. Under the current gradual increase in mining volume, Indonesia's nickel iron production increased month-on-month, and the supply of ferronickel remains relatively ample. Looking at the demand side, the negative feedback from downstream stainless steel and terminal demand to steel mills has led to cautiousness, despite the procurement demand from steel mills. Although there is procurement demand from steel mills, they are cautious due to the pressure of profit inversion in stainless steel. Last week, a steel mill in East China concluded a transaction at a bottom price of 960 yuan/mtu, which boosted market sentiment. However, due to the weak willingness of terminal buyers to accept prices, this price remained at the trading level and did not transmit to the terminal. In summary, nickel iron prices are supported by cost factors and the rebound in stainless steel prices. However, due to weak demand, it is expected that nickel iron prices will remain stable for the time being.

Stainless Steel: Last week, the spot price of stainless steel stabilized after falling to a low level. On April 12th, the SMM 304 cold-rolled coil quotation for burr edges was 13,700-13,900 yuan/ton, a significant increase from the previous week, and the SS contract showed an upward trend. Last week, steel mills raised prices again at the opening, leading to a good trading atmosphere. Although the batch approval volume of steel mills was relatively low, it is expected that the supply will decrease starting this week. Merchants began to replenish their stocks at low prices, causing the center of gravity of stainless steel to move upward, but low-priced goods are still flowing out, and the price range of spot goods is relatively large. In terms of social inventory, last week's arrival volume was large, with centralized distribution. However, social inventories still mainly decreased. In Wuxi, the accumulation range of 300 cold and hot-rolled coils was small. In Foshan, due to the reduction in cold-rolled supply, coupled with the rebound in oversold conditions, downstream purchases increased. The removal of inventory during the week was still acceptable. Although there is a large accumulation range in Wuxi, prices are still stable. The production reduction and adjustment in April are relatively small, and it is expected that there will be insufficient power to drive up spot prices in the future.