By mid-July, what will happen to laterite nickel ore prices? [SMM Analysis]

1. Market Overview

The nickel ore market in July exhibited complexity from multiple layers and angles. Nickel ore prices have shown a steady rise under the influence of various factors, from the supply and demand in the industry to the impact of regional factors. Currently, the main market participants, constrained by the overall sluggish downstream demand including NPI, showed varying degrees of fluctuation in the acceptable purchase prices for nickel ore in the supply, demand, and trade circulation sectors.

2. Supply and Demand Analysis

Supply Side:

Production: The circulating supply of Indonesian laterite nickel ore has shown a clear upward trend, driven by the progress of the RKAB approval quota in June. However, recent high-frequency rainfall in many regions of Indonesia has delayed the shipment of laterite nickel ore for domestic trade, further affecting the market supply rhythm. As a result, the supply increase of domestic laterite nickel ore in Indonesia has not expanded as quickly as expected.

Regional Differences: In the Philippines, an important supplementary source for Indonesian laterite nickel ore, the pressure on nickel ore shipments due to recent weather factors has also become evident. High-frequency rainfall and potential typhoons have become significant factors causing the overall low shipment efficiency of Philippine laterite nickel ore.

Demand Side:

Industrial Demand: With the fluctuations in the NPI market, different producers face varying degrees of pressure from production costs, leading to a divergence in their requirements for nickel ore and raw material costs. Despite the relatively high nickel ore costs in July, there are expectations of new Indonesian NPI production lines. However, the capacity increase may be minimal.

Product Conversion: With relatively low NPI prices, some producers have turned to producing nickel matte to seek better profit margins. However, in the current market conditions, the profit margin after converting to nickel matte production is also narrowing, providing weak support for nickel ore prices in the short term.

3. Price Analysis

Recent Fluctuations: In July, laterite nickel ore prices were influenced by the strong performance of HPM and premiums. The mainstream transaction premium of Indonesian laterite nickel ore for domestic trade trended upward. Additionally, the prices of extreme transactions, although less frequent, also showed an increase compared to June.

Price Expectations: Entering the second half of July, the market's expectations for disruptions in the shipment efficiency of Indonesian laterite nickel ore for domestic trade due to weather factors have begun to weaken. In the short term, the overall supply and demand relationship has not substantially improved, and mainstream transaction prices are expected to fluctuate within the current range. However, with the evident expectation of a decline in HPM in August, the downward trend in the price of Indonesian laterite nickel ore for August is gradually becoming apparent.

In summary, although the prices of Indonesian laterite nickel ore for domestic trade are expected to stabilise in the latter part of July, there remains some room for price decline entering August.