The high-nickel pig iron market is sluggish; the supply-demand imbalance continues to affect price trends

Within the week, the average price of SMM 8-12% high nickel pig iron was 975.2 yuan per nickel point (ex-factory, including tax), down 3.8 yuan per nickel point compared to last week's average price. Meanwhile, the FOB (Free on Board) index for Indonesian NPI was up by $0.4 per nickel point compared to last week. Overall, the high nickel pig iron market continued its weak trend.

From the supply side, the domestic high nickel pig iron market faces a rather grim situation. The profit inversion of domestic smelters has further intensified, meaning the production cost has surpassed the sales revenue, thus diminishing the drive for production and making smelters less motivated to ramp up production. Therefore, the domestic high nickel pig iron output is expected to remain at low levels. On the other hand, in Indonesia, although the premium on Indonesian nickel ore has declined this week and the raw material supply tightness for smelters has eased somewhat, the production expectation for high nickel pig iron in Indonesia remains positive amidst gradual commissioning of new capacities, which might affect the global market.

On the demand side, with the approaching National Day holiday this week, although the stainless steel spot price has stabilized, the inventory restocking by downstream users has not met expectations, indicating weak market demand. Moreover, as the profit margins of stainless steel plants are still inverted, this situation affects raw material procurement, leading to prolonged procurement cycles and thus unsatisfactory market transactions.

In summary, the contrast between rising supply and weak demand suggests that high nickel pig iron prices are likely to remain weak in the short term. Additionally, the average discount of high nickel pig iron to electrolytic nickel this week stood at 293.0 yuan per nickel point, up by 28.9 yuan per nickel point compared to last week. Despite the slower decline in the price of high nickel pig iron, due to the approaching month-end and some steel plants having completed early restocking of raw materials, combined with the ongoing weakness in the stainless steel market, the raw material market prices remain under pressure.

For the pure nickel market, following the Federal Reserve’s 50 basis points (0.5 percentage points) rate cut last week, the central bank also implemented a 0.5 percentage point reserve requirement ratio cut and a 0.2 percentage points rate cut this week. These continuous monetary policy efforts have bolstered market confidence, creating positive effects for the non-ferrous metals market, thereby driving a narrow upward trend for nickel prices. However, despite this increase, the overall market volatility persists.

Looking ahead, the transmission of consumption policies to the stainless steel market will take some time to materialize, during which spot prices may remain lackluster, keeping raw material markets under pressure and the running trend still weak. However, under the stimulus of macro monetary policies, nickel prices may continue to rise. It is expected that the discount between high nickel pig iron and electrolytic nickel will continue to widen next week. Therefore, in such a complex market environment, participants need to closely monitor policy changes and market supply-demand dynamics to promptly adjust their strategies accordingly.