Summary: Since April, the center of gravity of nickel prices has continued to move up, but against the backdrop of an overall strong nonferrous metals sector, the rise in nickel prices has not been smooth. The reason is that the nickel fundamentals are not contradictory, long and short forces are balanced, and there is a lack of strong upward drive. Looking ahead, amid a strong recovery in downstream demand and tight nickel ore supply, nickel prices are expected to start a new round of gains.
Reported by Futures Daily on August 26: Since April, the center of gravity of nickel prices has continued to move up, but in the context of generally stronger nonferrous metals, nickel's upward momentum has not been smooth. This is due to the absence of prominent contradictions in nickel fundamentals, with long and short forces balanced and lacking strong upside catalysts. Going forward, with strong downstream demand recovery and tight nickel ore supply, nickel prices are expected to embark on a new round of upward movement.
Nickel ore remains in a tight supply pattern. Since Indonesia imposed its ore export ban at the beginning of the year, China's nickel ore supply has been in a tense state, and the sudden overseas pandemic in March forced a short-term disruption in Philippine nickel ore supply, heightening the tension further. From March 18, the Philippines' major mining areas were gradually closed, and Zambales near the capital was not gradually reopened until mid-May, with nickel ore exports returning to normal in June. However, in early August, the Philippines again announced a lockdown of Manila and surrounding provinces. Although no mining area lockdowns were imposed, market concerns about ore supply have resurfaced. In addition, Filipino crew members have recently tested positive at Chinese ports one after another, prompting major Chinese ports to upgrade quarantine and inspection measures, which has lengthened the time from unloading nickel ore to delivering it to plants. Meanwhile, nickel ore port inventories in China have been declining rapidly, with a cumulative drop of more than 50% since the beginning of the year, and current port stocks are at a historical low. Due to the shortage, nickel ore prices have risen quickly, with mainstream 1.5% grade ore rising to US$54-56 per wet tonne, a cumulative gain of nearly 40%, far exceeding the highs previously seen during speculation over Indonesia's export ban. Although the third quarter is the peak export season for Philippine nickel ore, with exports in July-September expected to exceed China's total nickel ore imports in the first half of the year, the Philippines will enter the rainy season again in the fourth quarter, while Chinese NPI plants are showing surging demand for ore restocking. The tight nickel ore supply is expected to be difficult to ease within this year, providing cost support for nickel prices.
Domestic nickel pig iron is in serious shortage. In addition to continuous gains in ore prices, nickel pig iron prices have also risen accordingly. Since mid-July, the mainstream ex-works price of high-grade NPI has jumped from CNY 970/nickel unit to CNY 1,100-1,110/nickel unit, an increase of 14.43% in just one month. Due to the booming stainless steel market, stainless steel output has increased for two consecutive months, expanding raw material demand. Large domestic stainless steel mills have entered the market to buy high-grade NPI materials. The combined purchase volume of major mills including Tsingshan, TISCO, Dongte, Chengde and Zhangpu has exceeded their planned procurement volumes by more than 200,000 mt. At present, domestic NPI is severely short, with many plants saying they have no spot goods. It is reported that Shandong Xinhai's orders have been scheduled into October. In addition to scarce domestic NPI, Indonesian NPI cargoes arriving at Chinese ports have also been quickly snapped up. Due to the sharp surge in ore prices, domestic NPI plants suffered heavy losses earlier. From June to August, several NPI producers in Inner Mongolia, Liaoning and other regions cut output, halted production or switched production due to cost pressure. In early August, more than seven high-grade NPI production lines in Inner Mongolia were idled, reducing high-grade NPI output by more than 30,000 mt, and another production line is set to halt next month. Most of the idled furnaces are large 33,000 KVA submerged arc furnaces. Outside Inner Mongolia, an NPI plant in Liaoning halted production at the end of June for environmental reasons, while another idled high-grade NPI plant is expected to resume production in late August. The combined monthly production impact is more than 8,000 mt. As the pace of Indonesian NPI capacity commissioning slows, the market generally expects NPI imports to miss expectations. It is worth noting that, stimulated by high import profits, a large inflow of Indonesian NPI supplies cannot be ruled out.
Demand is expected to continue growing. In mid-June, stainless steel prices staged a one-sided rally, and stainless steel mills' production profits turned from losses to gains. Although stainless steel output hit new highs in July-August, social inventories did not show significant accumulation, which indirectly reflects very strong downstream demand. According to statistics, social inventories in Wuxi and Foshan stood at 871,800 mt in mid-August, up 6.6% month on month and still within a reasonable range. According to feedback from steel mills, downstream demand is gradually recovering, and end users are worried about raw material shortages caused by delayed deliveries from stainless steel mills, leading to a surge in short-term stainless steel orders. In addition, the new energy vehicle market is picking up. In July, new energy vehicle sales were about 87,000 units, up 8.9% month on month and surging 160.4% year on year. As end-market policy support continues to increase, demand is likely to keep growing.
In summary, nickel fundamentals are gradually improving. Tight nickel ore supply makes a significant increase in NPI output less likely, while robust stainless steel demand and a recovering new energy vehicle market provide some support for nickel prices. In the future, nickel prices will continue to follow the logic of rising costs. Higher nickel ore prices will lift the price center of each segment of the industry chain, leaving significant upside room for nickel prices.