High-Grade NPI Prices Rebound After Bottoming Out, Intensifying the Tug-of-War Between Sellers and Buyers

This week, the high-grade NPI market experienced a significant price rebound. According to SMM data, the average price of 8-12% high-grade NPI rose to 935.9 yuan/mtu, with the ex-factory, tax-included price increasing by 1.6 yuan/mtu WoW. Meanwhile, the Indonesian NPI FOB index also rose by $0.2/mtu WoW. This price recovery was mainly attributed to various market factors.

Supply side, the domestic market was affected by the rainy season in the Philippines, leading to firm ore prices and increased production costs for high-grade NPI. Smelters saw their production margins squeezed, prompting some producers to implement slight production cuts. Meanwhile, the Indonesian market showed different dynamics: some medium-sized smelters reduced production, while large top-tier enterprises continued to expand capacity. With the addition of new capacity, Indonesia's high-grade NPI supply saw a slight increase compared to December.

Demand side, as the Chinese New Year holiday approached, trading activity in the stainless steel market declined. Coupled with seasonal maintenance at stainless steel mills, demand for high-grade NPI weakened. However, some traders remained optimistic about the market outlook, leading to a slight improvement in market sentiment. Although transaction prices hit recent lows, the proportion of long-term agreements with steel mills increased, tightening the availability of high-grade NPI in the market. As a result, prices are expected to rebound in the short term.

Additionally, the discount of high-grade NPI to refined nickel widened to 339.65 yuan/mtu this week, an increase of 30.55 yuan/mtu WoW. This reflects the bottom-out trend in high-grade NPI market prices.

From a macroeconomic perspective, US jobless claims exceeded expectations, and combined with easing inflation data, the US Fed's hawkish stance softened. Market expectations for an interest rate cut in H1 began to rise, increasing uncertainty in the non-ferrous metals market.

In the refined nickel market, supply saw a slight MoM decline, but downstream sectors such as alloy producers actively restocked ahead of the Chinese New Year, improving the fundamentals. This further supported the upward trend in nickel prices. LME nickel inventory, after a buildup, began to show signs of destocking, which also contributed to the price increase. Meanwhile, the tight supply of Indonesian nickel ore continued to intensify, becoming another factor driving the nickel price rebound.

Looking ahead to the short-term market, driven by bullish sentiment, high-grade NPI prices are expected to continue rising, although weak downstream demand will limit the extent of the increase. Additionally, refined nickel prices may continue to climb due to international political factors. Overall, the price gap between high-grade NPI and refined nickel is likely to widen further, while smelters' losses have already eased this week.

On the raw material side, auxiliary material prices dropped back slightly this week, with coke prices continuing to decline due to weak downstream demand. On the ore side, affected by the rainy season, shipments from the Philippines remained limited, trading was sluggish, and ore prices held steady. Looking ahead to the coming week, auxiliary material prices are expected to remain stable ahead of the Chinese New Year, while ore prices show no significant downward trend. High-grade NPI prices may continue to recover, driven by traders' pre-holiday restocking, and smelters' losses are expected to ease further.