[SMM Analysis] Negative Premium Arrives: RKAB Release and a Delayed Rainy Season Push Indonesian Saprolite Below HPM

Indonesian nickel ore enters the fourth quarter with its first-half supply constraint loosening. The 2026 RKAB was initially set at 260 to 270 million tonnes, well below 2025 quota. By late September, ESDM had gradually released revised approvals. The clearest sign of the shift is that the saprolite premium has turned negative for the first time in this cycle.

Between August 28 and September 28, SMM's 1.6% Ni delivered price fell from US$65.80/wmt to US$63.40/wmt. The HMA eased only 1.54% to US$16,698.00/t, which accounts for US$0.90/wmt of that drop; SMM calculates the remaining US$1.50/wmt came from the premium. The 1.6% premium has narrowed from US$1.52/wmt to US$0.02/wmt, 1.5% ore now trades flat to HPM at US$58.50/wmt, and 1.4% ore trades US$2.03/wmt below HPM. Once barge freight is netted out, 1.5% and 1.6% miners are realising way below HPM on an FOB basis.

Limonite is moving in the same direction. Kepmen ESDM No.363.K/MB.01/MEM.B/2026, effective September 15, cut the 1.2% Ni HPM from US$44.97/wmt to US$24.89/wmt. With 1.2% ore delivered at US$26.50/wmt, SMM expects prices to drift toward the new benchmark as revised RKAB tonnage arrives. Demand offers no offset. HPAL output has not risen significantly, as elevated sulphur costs squeeze margins while nickel and cobalt payables on MHP remain weak, leaving producers little incentive to push utilisation before year-end.

Weather reinforces the pressure from both sides. Under a very strong El Niño, BMKG expects the rainy season to arrive late across 61.08% of Indonesia. This extends the mining and barging window and removes the usual reason for smelters to restock ahead of the wet season. The same drought is also cutting demand. Since September 22, water shortages have forced several RKEF lines at IMIP to reduce output, and SMM estimates an NPI loss of 50,000 to 70,000 mt if the disruption lasts half a month. More ore is available to mine just as less is needed to smelt.

Overall, SMM expects saprolite prices to remain under pressure in October, with the negative premium widening on 1.5% and 1.6% ore. SMM also expects 1.2% limonite to ease even downward. Conviction is high for saprolite and moderate for limonite, as quota release, an extended mining window and smelter curtailments all point the same way. With the HMA having declined for two consecutive periods, SMM expects the October HPM to move lower, adding benchmark pressure to both limonite and saprolite prices.