The stainless steel peak season is not performing well, and the price of nickel pig iron is facing downward pressure

During the week, the average price of SMM 8-12% high-nickel pig iron was RMB 999.9 per nickel point (ex-factory, tax included), down by RMB 1.8 per nickel point compared to last week. Meanwhile, the Indonesian NPI FOB index also decreased by $0.6 per nickel point from last week. Overall, the transaction prices of nickel pig iron began to weaken this week.

From the supply side, domestically, nickel ore prices remain high while nickel pig iron prices are expected to weaken, constraining the profit margins of smelters. Considering these factors, the supply of domestic nickel pig iron is not expected to increase significantly in September. In Indonesia, new nickel pig iron production lines were commissioned ahead of schedule, but the release of Indonesian nickel ore has not met expectations, leading to low raw material inventory levels at smelters and difficulty ramping up capacity. Therefore, the supply increase is quite limited.

On the demand side, the start of the traditional peak season for stainless steel was not smooth, with spot prices dropping significantly. However, due to pre-holiday restocking for the upcoming National Day holidays and the fact that the second half of the year is traditionally a production peak season, stainless steel output is still expected to increase significantly, which sustains demand for nickel pig iron.

In summary, although there are signs of simultaneous increases in both the supply and demand of nickel pig iron, the deep decline in stainless steel and nickel prices has put substantial pressure on nickel pig iron prices. In the short term, nickel pig iron prices may tend to run weak.

Additionally, during the week, the average discount of high-nickel pig iron relative to electrolytic nickel was RMB 260.6 per nickel point, narrowing by RMB 48.9 per nickel point compared to last week's discount. The price of high-nickel pig iron started to decline from the beginning of the week. The unsmooth start of the traditional "Golden September, Silver October" period and the expanding decline in stainless steel prices have intensified market panic, with this negative feedback also spreading to the raw material market, leading to further price declines.

Regarding pure nickel, the nonfarm payroll data and macroeconomic indicators for August were below expectations, exerting a bearish impact on the non-ferrous metals market. Pure nickel prices dropped considerably, with LME nickel falling below $16,000 per ton, and SHFE nickel dropping below RMB 125,000 per ton during the week. The discount of high-nickel pig iron relative to electrolytic nickel began to narrow.

In the short term, although the cost support for high-nickel pig iron limits its price decline, nickel prices may still face a downward risk influenced by macroeconomic factors. It is expected that the price gap between nickel pig iron and electrolytic nickel will continue to narrow next week compared to this week.