[SMM Analysis] NPI Market Review and Outlook for China's National Day Holiday

China's high-grade NPI market paused price quotations over the holiday, and trading was thin. The SMM Indonesia NPI FOB index held steady at $134.7/mtu. After the holiday, NPI prices look unlikely to rebound, but the room for further declines also appears limited.

On the cost side, Indonesia's supplementary 2026 RKAB quotas continued to receive approval and reach the market during the holiday. The delayed rainy season has also extended the mining window. Together, these pushed pyrometallurgical ore prices noticeably lower. The average CIF price of 1.6% Ni ore fell from $63.4/wmt on September 28 to $59.0/wmt. Before the holiday, the full-cost profit margin at IWIP had already narrowed to 0.01%. Cheaper ore will lower Indonesian NPI production costs, which weakens cost support for prices.

On the supply side, disruptions are building. First, the drought and water shortage in Sulawesi have not eased. Since September 22, some RKEF lines at IMIP have cut operating rates by about 30-40%. Meteorological agencies expect a very strong El Niño to form around November, which could prolong the water shortage. Second, Indonesia's Coordinating Minister Bahlil Lahadalia said the government is considering regulating smelter utilization rates if the global nickel market remains oversupplied. Third, a Chinese-invested NPI smelter in Morowali is facing a petition for suspension of debt payment obligations, though no production halt has been confirmed. None of these factors is likely to fully materialize in the short term, but together they provide some support to market expectations.

On the demand side, China's stainless steel social inventories stopped falling and began rising again before the holiday, as the expected peak season failed to materialize. Steel mills had largely finished restocking beforehand and are expected to keep buying only as needed after the break. A major stainless steel mill's pre-holiday purchase at 1,040 yuan/mtu delivered has effectively anchored current transaction levels.

Overall, falling ore prices and weak downstream demand will cap any NPI price rebound. However, drought-related output cuts in Indonesia and expectations of policy-driven production controls should limit the downside. Going forward, the key watchpoints are how long the water-related cuts last and whether Indonesia sets out details on regulating smelter utilization.