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?

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.