The High-Grade NPI Market Sees Robust Transactions and Is Expected to Fluctuate Upward in the Short Term

This week, the SMM 8-12% high-grade NPI average price was 956.7 yuan/mtu (ex-factory, tax included), up by 12.5 yuan/mtu WoW, marking a significant increase. Meanwhile, the Indonesian NPI FOB index also rose by $1.6/mtu WoW, further confirming the upward trend in high-grade NPI prices. The price increase of high-grade NPI this week expanded, driven by multiple factors on both the supply and demand sides.

Supply side, domestic high-grade NPI smelters are generally operating at a loss, with weak production motivation. Due to significant cost pressure, smelters' production enthusiasm remains low, and production is expected to stay at a low level in the short term. This supply-side contraction has provided support for prices. In Indonesia, weather factors have restricted mining and transportation activities in some areas. Additionally, a major production area’s smelter reduced its production load due to certain issues, leading to a decline in Indonesian high-grade NPI output. As a key global supplier of nickel resources, Indonesia's production fluctuations have a significant impact on the global market.

Demand side, the stainless steel spot market remained sluggish, with prices continuing to be weak and market transactions relatively quiet. Stainless steel mills reduced their inquiries for high-grade NPI, reflecting weak downstream demand. However, concentrated procurement activities by traders have somewhat boosted market sentiment, pushing the high-grade NPI market center upward. In the short term, high-grade NPI prices are expected to fluctuate upward.

Price and cost side, this week, the average discount of high-grade NPI to refined nickel was 292.65 yuan/mtu, narrowing by 17.52 yuan/mtu WoW. The narrowing discount indicates strong upward momentum for high-grade NPI prices. Against the backdrop of tight marketable resources, concentrated procurement by traders drove transaction prices to consecutive new highs, further improving market sentiment. On the refined nickel side, news of additional quotas for Indonesian nickel ore RKAB caused refined nickel prices to pull back. Macro perspective, Trump's announcement of a 25% tariff on steel and aluminum increased market uncertainty, negatively impacting the non-ferrous metals sector. However, refined nickel prices, supported by costs, have limited downside room.

Cost and raw material side, cost side, based on nickel ore prices from 25 days ago, the cash cost of high-grade NPI showed a narrowing loss for smelters this week. On the raw material side, coking coal and coke prices dropped significantly due to upstream inventory accumulation and weakened downstream steel mill demand. Philippine nickel ore prices remained firm as shipments were limited by the rainy season.

Looking ahead to next week, coking coal and coke prices may decline further due to weak fundamentals, while nickel ore prices are expected to remain stable. Market sentiment for high-grade NPI may continue to fluctuate upward, and smelters' losses are likely to narrow further. In the short term, high-grade NPI prices are expected to maintain an upward trend, while refined nickel prices, supported by costs, have limited downside room.

Overall, the high-grade NPI market is showing an upward price trend driven by tight supply and traders' procurement activities. Despite weak demand in the stainless steel market, high-grade NPI prices are expected to remain strong in the short term. Meanwhile, improvements on the cost side have provided some breathing room for smelters. Moving forward, the market needs to closely monitor Indonesian weather changes, policy developments, and the impact of the global macroeconomic environment on nickel prices.