[SMM Analysis] Weekly Review of the Indonesian-2.7 Nickel Market for the second Week of 2025

Nickel Ore

Indonesian Domestic Trade Laterite Nickel Ore Transactions Active Post-Holiday, Premiums Rising
In terms of supply, in January, the Indonesian authorities announced that the approved RKAB quota for 2025 currently stands at 298 million wmt. The overall supply of local nickel ore in Indonesia remains relatively ample, which has stimulated active market transactions. In terms of demand, there is significant restocking demand from local pyrometallurgical plants in Indonesia in February. Additionally, post-Chinese New Year, downstream NPI and stainless steel prices have seen some increases, leading to a certain degree of profit recovery.

In terms of inventory, as of before the Chinese New Year, the inventory levels of Indonesian pyrometallurgical plants were mostly at half a month to one month. Furthermore, the February HPM benchmark price was reduced by $0.68, but the absolute price of ore is on an upward trend. The market holds strong expectations for an increase in premiums for Indonesian domestic trade ore in February. Currently, the mainstream premium for 1.6 grade ore is $17-18.

In summary, SMM expects that, influenced by policy uncertainties and the combined impact of post-holiday downstream stocking demand, Indonesian nickel ore prices still have some room for growth. However, due to the relatively ample supply following the approval of quotas in H1, there has been no significant structural change in the balance of Indonesian nickel ore. The price increase for Indonesian domestic trade ore may be relatively limited. The local policy stance in Indonesia and the progress of temporary quota issuance will continue to have a significant impact on subsequent nickel ore prices.

High-Grade NPI

High-Grade NPI prices may continue to strengthen, further reducing smelters' loss margins

The Indonesian NPI (nickel pig iron) FOB index increased by $0.5 per mtu WoW. This change reflects the market's continued confidence in rising high-grade NPI prices. In Indonesia, overall production declined due to reduced production days and adjustments to production schedules in certain regions.

On the demand side, although the stainless steel futures market fluctuated upward after the holiday, the spot market remained relatively stable. As long-term contract orders account for a large proportion of stainless steel mills' purchases, spot order purchase willingness was weak. However, market expectations remain optimistic, with some traders beginning to stockpile, further driving up market prices and keeping high-grade NPI prices relatively stable with a strong trend in the short term.

Meanwhile, international markets also saw news impacting price fluctuations. The Philippine Senate passed a bill banning raw ore exports, a policy similar to Indonesia's earlier approach, which disrupted market sentiment and caused prices to fluctuate upward.

From a macro perspective, the US January ADP employment data exceeded market expectations, with overall economic data performing well, boosting market sentiment and benefiting non-ferrous metals.

In the coming period, high-grade NPI is expected to continue rising amid limited resources. From an economic cost perspective, the cash cost losses for smelters narrowed this week under the current nickel ore price levels. Due to the auxiliary material market not fully recovering after the Chinese New Year holiday, auxiliary material prices remained stable with a weak trend this week. On the ore side, nickel ore prices are expected to remain firm, and under the influence of market sentiment, high-grade NPI prices may continue to strengthen, further reducing smelters' loss margins.