【SMM Analysis】Weekly Review of Indonesian Nickel Market-2.14

Nickel Ore
Premiums for Indonesian Domestic Trade Laterite Nickel Ore Continue to Rise, Prices Remain Strong

Currently, in terms of transaction prices: For pyrometallurgical ore, premiums for nickel ore from the Indonesian Big K industrial park generally range from $17-19, while premiums in other regions are mostly $20-22 due to freight costs.

In terms of supply, although Indonesia announced in January that the approved RKAB quota for 2025 is 298 million wmt, representing a significant increase in supply compared to the same period last year, the rainy season in the Sulawesi region and the launch of the SIMBARA system have somewhat impacted the market's available supply.

On the demand side, before the Chinese New Year, in-plant inventories at Indonesian pyrometallurgical plants were generally less than two months. In February, restocking demand became relatively evident, and active raw material procurement to some extent drove the rise in premiums. For hydrometallurgical ore, the QMB project's continued ramp-up at the beginning of the year, along with expectations of new projects coming online later this year, may lead to hydrometallurgical ore prices fluctuating upward.

On the cost side, the rise in NPI prices has brought some profit recovery, and downstream acceptance of higher nickel ore prices has improved. Additionally, the market remains cautious about uncertainties surrounding the full-year RKAB.

In summary, SMM expects Indonesian ore prices to remain stable with a slight upward trend in the short term. In the medium and long-term, influenced by multiple factors, Indonesian nickel ore prices still have some room for growth. However, the structural balance of Indonesian nickel ore has not undergone significant changes, and the price increase for Indonesian domestic trade ore may be relatively limited. The progress of Indonesia's official issuance of supplementary quotas for nickel ore within the year will still have a considerable impact on subsequent nickel ore prices.

High-Grade NPI
The Indonesian NPI FOB index increased by $1.6/mtu WoW, further confirming the upward trend in high-grade NPI prices. This week, the price increase of high-grade NPI expanded, mainly driven by multiple factors on both the supply and demand sides. On the supply side, mining and transportation in some areas of Indonesia were restricted due to weather conditions. Additionally, a major smelter in a key production area reduced its operating load, leading to a decline in Indonesia's high-grade NPI production. As a significant global supplier of nickel resources, fluctuations in Indonesia's production have a notable impact on the global market.

Demand side, the stainless steel spot market remained weak, with prices persistently low and market transactions relatively sluggish. Stainless steel mills reduced their inquiries for high-grade NPI, reflecting weak downstream demand. However, concentrated procurement by traders partially boosted market sentiment, pushing the market center for high-grade NPI upward. In the short term, high-grade NPI prices are expected to fluctuate upward. Against the backdrop of tight marketable resources, concentrated procurement by traders drove transaction prices to consecutive new highs, further improving market sentiment.

Cost and raw material side, cost side, based on nickel ore prices from 25 days ago, the cash cost of high-grade NPI showed a narrowing of smelters' losses this week. On the raw material side, coking coal and coke prices dropped significantly due to upstream inventory accumulation and weakened downstream steel mill demand. Nickel ore prices in the Philippines remained firm as shipments were limited by the rainy season.

Next week, coking coal and coke prices are expected to decline further due to weak fundamentals, while nickel ore prices are anticipated to remain stable. Market sentiment for high-grade NPI may continue to fluctuate upward, and smelters' losses are likely to narrow further. In the short term, high-grade NPI prices may continue to fluctuate upward, while refined nickel prices have limited downside room due to cost support.

Overall, the high-grade NPI market is showing an upward trend in prices, driven by tight supply and active procurement by traders. Despite weak demand in the stainless steel market, high-grade NPI prices are expected to remain strong in the short term. Meanwhile, improvements on the cost side have provided some relief for smelters. Moving forward, the market needs to closely monitor changes in Indonesian weather, policy developments, and the impact of the global macroeconomic environment on nickel prices.