Nickel Iron Market Update

Since July, the nickel iron market has been quite sluggish with sporadic inquiries but no actual transactions. Suppliers are finding it difficult to negotiate a lump-sum price, mainly relying on long-term agreements. Only one public lump-sum transaction was recorded in the middle of the month, with the latest transaction landing at 980 yuan/nickel (inclusive of tax upon arrival). However, the market has not shown significant fluctuations, and the wait-and-see attitude remains, with a clear divergence in price between supply and demand.

Nickel ore prices from the Philippines remain high, and the domestic market for high-grade nickel ore is quite cold, with 1.4% grade ore priced at 41-42 USD/wet ton, which is not well accepted by domestic iron plants. Only low-nickel high-iron ore Ni: 0.9% can still be traded at 37 USD/wet ton.

Affected by downstream pressure, the domestic nickel iron market is under pressure and is weakly running. Iron plant costs are significantly reversed, and profits are hit, leading to iron plants taking measures to reduce production to cope with losses. Apart from necessary production, iron plants have a low willingness to purchase existing high-priced nickel ore raw materials. Currently, the highest spot cost of domestic RKEF nickel iron plants has reached 1027 yuan/nickel, with the lowest profit margin at -5.59%.

Indonesian nickel ore supply is limited, and local factories have increased their demand for nickel ore imports to meet normal production needs. Especially the shipment volume of nickel ore from the Philippines to Indonesia has increased significantly. Although Indonesian iron plants are profitable, their profit margins are also narrowing. Currently, the highest spot cash cost of Indonesian nickel iron is close to 900 yuan/nickel, with the lowest profit margin recovering to 5.6%.

In July, stainless steel futures and spot prices remained weak, with more declines than increases. The market lacks confidence in the future and holds a bearish expectation. Stainless steel production in July has decreased. According to Mysteel statistics, the production in July is 3.2467 million tons, a decrease of 1.27% month-on-month, of which 300 series is 1.5764 million tons, a decrease of 4.64% month-on-month, and 7.19% year-on-year. In addition, affected by weakening demand, the de-stocking speed of stainless steel social inventory has slowed down, and the social inventory is at a high level compared to the same period last year.

Although the nickel iron price is currently weak, the downside is limited. The main reason is that both domestic and foreign iron plants have reduced nickel iron production capacity. The reduction and suspension of production by domestic iron plants due to profit losses have led to a reduction in capacity, while Indonesian iron plants, driven by profits, have shifted more nickel iron production lines to high-nickel lines. In addition, the shortage of nickel ore supply has led to a reduction in nickel iron capacity.

Moreover, according to data released by the National Bureau of Statistics, China's GDP growth rate in the first half of the year was maintained at 5%. Against the backdrop of economic recovery, coupled with the "Golden September and Silver October" as the peak season for stainless steel, multiple macro factors may help boost terminal demand. As the end of the month approaches, the steel plant procurement period is coming, and the market is waiting for centralized transactions to land.