Overnight SHFE Nickel Moved Rangebound, Supply Likely to Drop

SHANGHAI, Mar 31 (SMM) - Overnight nickel futures showed signs of falling after an increase following LME nickel in day trading. The contract is still under the influence of money game.

On the supply side, the pandemic has brought transportation problems, and the supply of Jinchuan nickel in Shanghai is relatively tight. As the price difference between SHFE and LME nickel remains great, and the supply of Sumitomo, NORNICKEL, NIKKELVERK nickel and nickel briquette is still tight. In terms of nickel pig iron, the production and transportation problems of NPI plants in Liaoning and Inner Mongolia have been seriously affected, and the output is expected to fall in March.

On the demand side, the cost efficiency of self-dissolved nickel briquette in the nickel sulphate plant has not recovered amid high futures prices. In addition, the output of the downstream precursor plants and the ternary cathode material plants did not contract in March thanks to their in-plant stocks, but the inventory in April will be low, hence there is possibility of production cuts. In terms of stainless steel, the operating rates of steel mills were lower than expected, and spot transactions were muted against the backdrop of high raw material prices. To sum up, under the background that futures prices deviate from fundamentals and the pandemic intensifies, nickel prices are bound to return to the fundamentals. 

Pure nickel : As the recent futures prices have deviated from the spot supply and demand pattern, SSMM now suspended offering premium/discount quotations of 1# Jinchuan nickel, 1# imported nickel and nickel briquette. SMM prices of 1# refined nickel, 1# Jinchuan nickel, 1# imported nickel are available as usual. This notice complies with IOSCO standards. Jinchuan nickel was quotated at 218,800-220,000 yuan/mt, with an average price of 219,400 yuan/mt, down 1500 yuan/mt from yesterday. NORNICKEL nickel was offered at 219,000-220,000 yuan/mt, and the average price was 1400 yuan/mt lower than the previous day. The price decline was mainly due to the downward trend of SHFE nickel driven by LME nickel. Nickel briquette was quotated at 216,800-218,000 yuan/mt, with an average price of 217,400 yuan/mt, down 500 yuan/mt from yesterday. At present, the cost efficiency of nickel briquette has not yet recovered, and the expectation of downstream procurement is not optimistic. There were few quotations from traders amid violently fluctuating SHFE nickel prices.

NPI: Recently, an overseas steel mill purchased thousands of tonnes of high-grade nNPI from Indonesia, and the transaction price was equivalent to 1,675 yuan/mtu (delivery to port, tax included). At present, domestic NPI prices are maintained at a high level under the support of high cost, price difference and tight supply. The downstream transactions were thin, and the steel mills still have poor acceptance of high-priced raw materials in the short term. The tug-of-war between upstream and downstream is still intensive. In addition, due to the impact of FENI imports, domestic steel mills try to purchase high-grade NP as many as possible, which also leads to higher prices.  

Nickel sulphate: The volatility of nickel prices has not completely subsided, but nickel sulphate has now reached the time for centralised purchasing. Inquiries and offers have gradually become active, and the upstream was somehow willing to lower their prices. According to SMM research, due to the delay in the procurement cycle, upstream manufacturers currently have sufficient inventory, while some downstream enterprises' raw material inventory has dropped to a low level. The market demand has gradually become clear despite the volatility of nickel prices. However, due to the comprehensive impact of factors such as cost, capital and inventory, the differences in the quotations of upstream companies still exist. According to the comprehensive understanding of upstream and downstream participants, the price range of salt factory was 45,000-48,000 yuan/mt. Some quotations were still higher than 50,000 yuan/mt due to cost problems. However, the acceptable prices of the downstream was still below 46,000 yuan/mt. Although there are still some differences in the acceptable prices of the two sides, the possibility of successful transactions has picked up. 

Stainless steel: The SS contract fluctuated near the 10-day moving average, and the overall range stayed above the 20,000 yuan/mt. In the spot market, due to the impact of the pandemic, transactions were poor. The Wuxi Dongfang Steel City market has been closed, and relating staff are quarantined. But some traders' warehouses are not in the Steel City, and orders can be delivered normally. Nonetheless, the overall market transaction was too poor, and regional logistics and transportation are also limited. Spot prices in Wuxi were relatively stable yesteraday. The prices of 304 cold-rolled coils moved between 20,300-20,600 yuan/mt, and the prices of 304 hot-rolled coils were between 19,700-19,900 yuan/mt. As of 10:30 am (Beijing time), the SHFE SS 2205 contract stood at 20,310 yuan/mt, and the spot premiums in Wuxi were 160 - 460 yuan/mt. (Spot prices of deburred edge products = Spot prices of burr edge products + 170 yuan/mt).

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]