Frequent COVID Outbreak Weighed on Nickel Fundamentals

SHANGHAI, Jul 19 (SMM) - On the supply side, although the current terminal demand has improved, the stubbornly high premiums have led to less supply of Jinchuan nickel in the market. NPI l plants held the prices firm amid cost support, and some partially reduced the production due to losses as they had some high-priced nickel ore purchased earlier, while refrained from selling. From the demand side, according to SMM research, the Wuxi region has achieved zero COVID in social sense, and some trading centres and warehouses have been released from COVID control and operated normally. But the market purchasing sentiment was muted, and it is expected that the spot prices will continue to decline in the short term. In terms of alloys, due to the procurement cycle and high spot premiums, recent spot transactions have been bleak. To sum up, the fundamentals of nickel are weak, which is expected to keep rangebound with occasional drops this week. 

Pure nickel: In the spot market, Jinchuan nickel was quoted with premiums of 20,000-21,000 yuan/mt as of July 18, with an average of 20,500 yuan/mt, down 500 yuan/mt from a day ago. NORNICKEL nickel was quoted at 12,500-13,000 yuan/mt, with an average price of 12,750 yuan/mt, down 750 yuan/mt from a day ago. The spot premiums of pure nickel were little changed compared with the previous trading day, mainly because the futures prices also changed little. In terms of nickel briquette, the prices were 150,500-151,900 yuan/mt, which was 1800 yuan/mt lower than a day ago. The prices dropped along with the falling premiums, and the cost efficiency of producing nickel sulphate with briquette was also poorer than intermediates. Coupled with the fact that the mainstream raw material for alloy is mainly nickel plate, the transactions of nickel briquette were extremely scarce.

NPI: As of July 18, SMM Ni 8-12% NPI was 1,310 yuan/mtu (ex-factory, tax included), flat from a day ago. And market transactions were thin. Affected by macro factors, commodity prices fluctuated greatly in recent days. SHFE nickel and stainless steel prices rebounded, and the futures market has a certain impact on the spot market in terms of market sentiment, but the actual transaction was not cheering. On the fundamentals, both the upstream and downstream across the NPI industry chain were weak. As the stainless steel sector remained poor, the demand and acceptable prices of raw materials were poor, while NPI plants held the prices firm amid losses. It is expected that the NPI will be oversupplied in the long run, and the prices will be increasingly difficult to stay high. Coupled with falling nickel ore prices, NPI will see weaker cost support. 

Stainless steel: On July 18, the stainless steel prices declined as a whole. The prices of 304 stainless steel dropped further. The base price of private 304 in Wuxi stood at 17,000 yuan/mt, and the prices in Foshan were slightly lower; the prices of hot-rolled coil stood at 16,350 yuan/mt. The prices of 201 J2 stainless steel remained stable, and the prices of 430 cold rolled coil further fell to around 7,400 yuan/mt.

From the demand side, according to SMM, the Wuxi region has achieved zero COVID in social sense, and some trading centres and warehouses have been released from COVID control and operated normally. The pandemic situation in Beihai city, Guangxi province was severe, and the control measures have been upgraded with local steel mills adopting closed-loop management and production. Therefore, the total output is unlikely to be affected.

The mainstream base prices of 304 stainless steel in Wuxi and Foshan were both below 17,000 yuan/mt, and it is expected that the price will continue to decline along with the futures prices. In the case of poor demand, the demand for J1 stainless steel is more sluggish due to its poor cost effectiveness, and the spread between J1 and J2 narrowed. The prices of 201 J2 were relatively stable, and mills may be willing to lower the prices. Therefore, it is expected that the prices will drop further in the short term.

The prices of 430 stainless steel continued to fall, and the guide prices offered by steel mills were firmly high. However, in the case of thin transactions, the market quotation has deviated from the guide prices, with the former expected to fall further. On the cost side, NPI prices have stabilised at the moment, and ferrochrome prices dropped, resulting in weaker cost support.

The prices of 304 cold-rolled coils moved between 16,900-17,200 yuan/mt, and the prices of 304 hot-rolled coils were between 16,350-16,750 yuan/mt. 316L/2B was reported at 28,000-28,400 yuan/mt in morning trade, 201/ 2B at 9,300-9,600 yuan/mt, and 430/ 2B at 7,300-7,900 yuan/mt. As of 10:30 am (Beijing time), the SHFE SS 2208 contract stood at 16,290 yuan/mt, and the spot premiums in Wuxi were 780-1,080 yuan/mt. (Spot prices of deburred edge products = Spot prices of burr edge products + 170 yuan/mt).