TAIPEI, TAIWAN — News of potential production cuts at major nickel smelters in Indonesia caused a sudden jump in paper futures on October 21, pushing the Shanghai Futures Exchange (SHFE) nickel benchmark up 3.05% in a single day. Rumors suggested cuts of 50% for MHP, 50% for nickel matte, and 20% for Nickel Pig Iron (NPI).
For international stainless steel buyers, it is essential to separate paper futures speculation from real physical steel supply. An analysis by the Shanghai Metals Market (SMM) confirms that while battery-grade nickel is losing money, stainless steel feedstocks (NPI) are still profitable—meaning physical stainless steel prices remain stable and grounded.
1. Upstream Reality Check: Battery Intermediates vs. Steelmaking Feedstock
The raw materials used for electric vehicle (EV) batteries and stainless steel operate under completely different financial conditions:
[MHP (EV Battery Feed)] ──> Deep Losses ($14.5k Cost vs. $13k Price) ──> High Likelihood of Real Cuts
[Matte (EV Battery Feed)] ──> Operating at 22% Capacity (Negative Margin) ──> Minimal Effect on Market
[NPI (Stainless Feedstock)]──> Positive Margins & Involuntary Drought ──> Unlikely to Cut Voluntarily
EV Battery Feedstock (MHP) Is Under Severe Pressure
Producers of Mixed Hydroxide Precipitate (MHP), used in EV batteries, are losing money. Production costs sit near $14,500/MT, while market prices are below $13,000/MT. A 50% cut here is likely because producers cannot afford to keep losing money.
Nickel Matte Production Is Already Down
Converting NPI into nickel matte resulted in heavy losses during Q3. Most factories already switched back to producing NPI months ago, dropping matte operating rates to a low 22%–23%. Cutting this depleted output further has virtually no impact on stainless steel availability.
Stainless Steel Feedstock (NPI) Remains Profitable
Unlike battery-grade nickel, Nickel Pig Iron (NPI) smelters—which supply stainless steel mills—are still profitable on a cash basis. While a 20% output drop is currently happening at the Morowali Industrial Park (IMIP) due to drought-related water shortages, smelters have no financial reason to voluntarily cut production further.
2. Simple Guidance for Stainless Steel Buyers
Ignore Futures Spikes: Short-term jumps on paper exchanges reflect traders closing positions, not real steel shortages. Primary Asian mills (Yusco, Tsingshan, Delong) continue to price finished stainless coil based on real factory costs and actual buyer orders.
Scrap Prices Matter More Than Nickel Rumors: Physical base prices for Grade 304 and 316L are supported by tight recycled stainless steel scrap supply and operating costs—not unconfirmed nickel rumors.
Focus on Custom Compliance: Instead of panic-buying, prioritize trade documentation. Under the EU’s active “Melt and Pour” rule, all shipments entering Europe must have verified EN 10204 3.1 Mill Test Certificates (MTC) showing exact Heat Numbers to avoid customs delays or 50% tariff penalties.
Raw Material Quick Summary
| Material | Current Market Status | Profitability | Direct Impact on Stainless Steel Buyers |
| MHP (EV Battery) | ~$13,000 / MT | 📉 Losing Money | Low: Affects EV batteries, not steelmaking. |
| Nickel Matte | 22% Capacity Running | 📉 Losing Money | Negligible: Production already switched back to NPI. |
| NPI (Stainless Feed) | ~1,045–1,065 RMB / Unit | 📈 Profitable | Moderate: Drought limits output, but voluntary cuts are unlikely. |
| Grade 304 Stainless | Base Price Defended | ➡️ Stable Floor | Stable: Driven by scrap costs and trade compliance. |
