Review and Forecast of NPI and Nickel Ore Prices

SHANGHAI, Aug 8 (SMM) – Last Friday August 5, SMM average price of Ni 1.5% nickel ore stood at $68.5/wmt on a CIF basis. The prices of nickel ore maintained a downward trend. On the supply side, the mines were unwilling to sell, and the nickel ore prices continued to decline. In particular, the prices of low-grade nickel ore or Ni 1.3% nickel ore dropped significantly to approaching the cost. Therefore the mines chose to reduce its output for limited profits. The demand side also remained weak. Stainless steel prices continued to trade at lows, weighing on NPI prices. Ferrochrome plants turned away from high prices due to long-term losses. At the same time, as domestic high-grade NPI ferrochrome plants were reducing the production and the output in July and August was expected to below 25,000 mt, their demand for nickel ore was relatively low. It is expected that the supply and demand of nickel ore will maintain a tight balance in the future, and a significant surplus in supply is very likely. In terms of price difference, the spread between mid-grade nickel ore and nickel ore of other grades narrowed to $10-11/wmt. As the price of Ni 1.3% nickel ore neared the cost, the plants were unlikely to compromise on the price. Apart from that, prices of other nickel ore still had room to fall. Should the NPI market continued to weaken, the bargaining power of plants over Ni 1.5% nickel ore prices might further reduced. 

In terms of NPI, the average price of SMM8-12% high-grade NPI stood at 1277.5 yuan/mtu last Friday. The prices remained volatile during the week, and the market transactions were muted. No new transaction price was released last week amid the deadlock between suppliers and buyers. The supply was still in a surplus, and a large amount of low-cost Indonesian NPI flew back to China, accounting for half of the domestic NPI market. In addition, since the sales prices of domestic NPI were already close to its costs, ferrochrome plants were reluctant to lower their prices. As a result, the plants had been holding their prices firm for weeks. Beisdie, ferrochrome plants were cautious about the future market and cut the production to varying degrees. The output of high-grade NPI in July-August is expected to fall, compared with that in June, to around 25,000 mt in nickel content. From the perspective of demand, the spot prices of stainless steel were still at a low level, and the social inventory of stainless steel still remained high. Although it is estimated that the output of 300-series in some steel mills will inch lower in August, the decline is expected to be limited. Therefore, the demand for NPI will extend weakness, and the prices of NIP will continue to move downwards. 

In conclusion, the market was uncertain about the future development of stainless steel, and thus stayed cautious about the prices of nickel ore and NPI. In addition, the surplus of NPI supply is a solid fact. It is necessary to wait and see whether the increased terminal demand for stainless steel will boost the prices, and whether the falling stainless steel inventory will bring about a recovery in the market. Only then are the prices of nickel ore and NPI likely to stabilise or rebound slightly.