What is the reason of "sky-high coefficient" for high-grade nickel matte? [SMM Analysis]

Published: Aug 23, 2024 16:35 (GMT+8)

Save

During the week, the high-grade nickel matte coefficient rose to 87-88 (against LME nickel). The overall market was quiet. The main reason for the coefficient increase was the decline in nickel prices to relatively low levels and the rising refining costs of high-grade nickel matte.

On the supply and demand side, high-grade nickel matte, as a raw material for refined nickel and nickel sulphate, has relatively low supply and demand elasticity compared to MHP. The reasons are: first, most refined nickel projects have integrated high-grade nickel matte refining projects; second, the proportion of hydrometallurgy intermediate products used as raw materials in new electro-deposited nickel projects is increasing; third, in nickel sulphate production, MHP has been the main raw material in recent years due to its economic advantages. Currently, there are limited domestic producers capable of using high-grade nickel matte as a raw material.

The current mainstream refining route is laterite nickel ore-NPI-low-grade nickel matte-high-grade nickel matte (RKEF + sulphur converter blowing). In new projects, a new process route has also emerged, namely laterite nickel ore-low-grade nickel matte-high-grade nickel matte (oxygen-enriched side-blown reduction process). According to SMM estimates, the cost difference between the two mainstream processes in the current market is small, both around $13,000, relatively stable. However, the recent decline in the average grade of nickel ore in Indonesia has slightly reduced the yield of high-grade nickel matte, leading to a slight increase in refining costs.

Given the above-mentioned fundamentals and cost characteristics of high-grade nickel matte, combined with the concentrated supply of intermediate products, the overall market transactions of high-grade nickel matte tend to be cyclical, with relatively stable absolute price fluctuations. Therefore, when nickel prices decline and cost support strengthens, sellers tend to raise coefficient quotes to avoid excessive profit compression.

However, there are two disruptive factors in the high-grade nickel matte market: first, its substitutability with MHP; second, its flexible interchangeability with NPI. In 2023-2024, with the continuous construction and ramp-up of new MHP projects, the supply of MHP will continue to increase, and the excess downstream refining capacity (nickel sulphate) of intermediate products will provide enterprises with the flexibility to choose between hydrometallurgy and pyrometallurgy intermediate products based on economic considerations. Meanwhile, NPI prices are rising due to tight supply and increasing ore prices, leading to better profits. Therefore, some production lines are flexibly switching to produce NPI. Considering these factors, high-grade nickel matte often exists as a plan B for buyers and sellers in the market, in a passive position.

Therefore, in the current market: first, overall downstream demand is weak; second, high-grade nickel matte is partially replaced by MHP due to high coefficient pricing; third, producers are driven by profits to switch to NPI production. These factors combined result in weak supply and demand and sluggish transactions.

Nickel Intermediates

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

14 hours ago

【SMM Nickel Flash】New Caledonia Sets Conditions for Raw Nickel Ore Exports From Three Strategic Reserves

New Caledonia's government adopted a deliberation on September 14 setting the conditions for exporting raw nickel ore from the Tiébaghi, Koniambo and South Laterite (Sud Latéritique) metallurgical reserves. The measure follows a July 22 law that permits, by derogation, the export of ore that local nickel plants are technically or economically unable to process. Export authorisations can be granted for up to 10 years. Under the new framework, mining companies must first offer the ore to local buyers before exporting it. The offer must be made at a floor price aligned with market conditions. Export applications will also be subject to review by New Caledonia's Mining Foreign Trade Committee (CCEM), while companies must submit annual activity reports and provide information on their financial position and the requested export period. The policy could create an additional outlet for nickel ore that cannot be economically processed domestically, potentially supporting mine utilisation and the financial position of local metallurgical operations. However, the requirement to offer the material locally first means exports remain conditional on domestic processing demand and the competitiveness of local buyers.

14 hours ago

15 hours ago

【SMM Nickel Flash】Ipilan Nickel Project Expands Operations Amid Rising Production

Ipilan Nickel Corporation is expanding mining operations at its Palawan nickel project as production and shipments increase. The company is developing additional mining areas and haul-road infrastructure to support higher output and exports to overseas buyers, including China. The project's Mineral Production Sharing Agreement (MPSA) has been renewed through September 2043, providing a longer-term basis for continued mine development. Ipilan is also working to expand its production capacity, which could increase its contribution to Philippine nickel ore supply. The expansion comes as Philippine nickel miners seek to strengthen ore supply for overseas markets amid changing production patterns across key mining regions.

15 hours ago

【SMM Nickel Flash】Indonesia Tightens Mining Contractor Rules Under New ESDM Regulation

Indonesia’s Ministry of Energy and Mineral Resources (ESDM) has issued Kepmen ESDM No. 365.K/MB.01/MEM.B/2026, tightening requirements on the use of mining-service contractors by mineral and coal mining companies. Under the regulation, IUP/IUPK holders are required to prioritise licensed mining-service companies (IUJP) located in the same regency/city as the mining operation. The use of subsidiaries or affiliated companies as mining contractors is restricted and requires approval from the Minister of ESDM, including arrangements involving direct shareholding or common ultimate beneficial ownership. Applications are subject to a review process, while exemptions may apply to government-assigned activities, including National Strategic Projects, construction of processing and refining facilities, and activities supporting domestic mineral and coal requirements. For the nickel sector, the regulation does not directly change RKAB quotas or nickel ore pricing. However, nickel mining groups may need to review existing affiliated-contractor arrangements, while the new requirements could affect contractor selection, mining costs and operational arrangements.

15 hours ago