SMM exclusive: Will the limited nickel ore resources affect future raw material prices, given that the raw material costs of NPI smelters account for 30% of the total production costs?

Published: Aug 22, 2023 17:13

Source: SMM

Save

We have introduced about NPI-related supply, technology, and pricing. This time, we will focus on the cost of the NPI smelting plants.

Analysis of costs among major NPI plants in Indonesia

Based on SMM research, the average raw material cost for NPI smelting plants accounts for over 30% of the total production cost. This means that the cost of raw materials is more significant than the cost of other factors. Therefore, NPI smelting plants need to have access to reliable information about the reserves and resources of nickel ore and nickel-based materials. Indonesia has identified over two hundred exploitable nickel mines. Additionally, based on predicted supply and demand trends, existing nickel mines can sustain stable production until 2040. In the long term, Indonesia is not at risk of facing a raw material supply crisis, and the likelihood of sharp increases in raw material prices is relatively low, which is advantageous for NPI smelting plants.

Nickel supply, demand, and nickel ore depletion in Indonesia

In addition to raw material costs, management, operation and auxiliary material costs are significant factors in total production cost. The state-owned company Jinchuan Group has higher management and operation costs compared to the private company Tsingshan due to their different business nature. As for the auxiliary material cost, Tsingshan benefits from economies of scale, enabling it to negotiate better deals and thus have a lower proportion of such costs.

While nickel ore resources are plentiful, global nickel inventories have been declining steadily since 2016, confirming the continued growth in downstream demand for nickel products and indicating significant potential for future growth.

After comparing NPI and pure nickel prices in the Chinese market with LME nickel prices, it's evident that there is a correlation between NPI and pure nickel prices. Therefore, SMM suggests that plants should consider hedging while controlling costs in their production and operations. This will help them address the decrease in nickel inventory and mitigate cost risks.

Global nickel inventory comparison and the correlation between NPI and pure nickel prices

Here are some past NPI project cases analyzed by SMM consulting teams:

Complete Nickel industry chain

Indonesian Nickel supply and price forecast

Analysis of global demand for nickel terminal products in traditional industries

Investment due diligence

Technology due diligence for a NPI production line in Indonesia

Analysis of key players in the market

Analysis of key players in Indonesian RKEF smelting sector

To learn about past project cases and explore customized solutions, you can have a detailed discussion with the SMM Consulting Team.

You can contact Project Manager Jiang Qianchun via phone at 15294607058 or email at jiangqianchun@smm.cn.

Market forecast Market review

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

For any inquiries or for more information, please contact: lemonzhao@smm.cn

For more information on how to access our research reports, please contact:service.en@smm.cn

Related News

15 hours ago

【SMM Nickel Flash】El Niño Weather Raises Production Risks at IMIP

The 2026 El Niño event continues to intensify, with international climate monitoring indicating that this could be one of the strongest El Niño events on record. Indonesia is already experiencing significant heat and dry conditions, with El Niño expected to peak in September. According to SMM, the current water shortage at IMIP is mainly affecting carbon steel production, while nickel production has not yet been impacted. However, if the dry weather and water shortages persist, further pressure on industrial water supplies could increase the risk of nickel production cuts.

15 hours ago

16 hours ago

Data: SHFE, DCE market movement (Sep 02)

The following table shows the ferrous and nonferrous metals movement on the SHFE and DCE on 02 Sep , 2026

16 hours ago

17 hours ago

[SMM Nickel Flash News] Daily Update — September 2, 2026

In terms of prices, this week marks the first week of the HMA pricing cycle for the first half of September, with the HMA standing at 16,733.33 US dollars per tonne. Indonesian nickel ore CIF average prices adjusted across all three grades: • 1.3% Ni: CIF average price at $30/wmt • 1.4% Ni: CIF average price at $52.8/wmt • 1.5% Ni: CIF average price at $59.2/wmt ________________________________________ Indonesia Policy & DSI ICOMEX Update — September 2, 2026 The Indonesian nickel ore market remains in a wait-and-see period, with the market closely monitoring further RKAB approvals and potential quota adjustments. Meanwhile, DSI is advancing the development of ICOMEX, its digital platform for monitoring and regulating mineral and strategic commodity exports. The platform is expected to progressively integrate key export-related data, including contracts, prices, ore grades, HS codes, vessels, destinations and settlement information. The development of ICOMEX is expected to improve export data transparency, regulatory oversight and price monitoring, while providing the government with a more comprehensive view of mineral export flows. Weather conditions across major nickel-producing regions remain generally manageable, although localized heavy rainfall could still cause temporary disruptions to mining and logistics. The market is also waiting for a potential revision to the HPM formula for limonite ore. Any changes to the pricing mechanism, particularly the treatment of associated metals and corrective factors, could affect limonite pricing and HPAL feedstock economics. Overall, the market remains cautious, with RKAB approvals, ICOMEX development, weather conditions and the potential limonite HPM revision being the key factors to watch in the near term.

17 hours ago