【SMM Analysis】Weekly Review of Indonesian Nickel Market-2.21

Nickel Ore

Indonesian Domestic Trade Laterite Nickel Ore Premiums Continue to Rise, Price Increase Trend Persists
Currently, in terms of transaction prices: For pyrometallurgy ore, the premium for nickel ore from the Sulawesi Island industrial park in Indonesia rose to $18-19 in February, with the SMM 1.6 grade domestic trade ore CIF price at $39/wmt. For other islands, affected by freight costs, nickel ore premiums mostly exceeded $22. For hydrometallurgy ore, mainstream CIF market quotations were above $25.

In terms of supply, although nickel ore supply is slightly more abundant compared to the same period last year, the rainy season in the Sulawesi region and the upcoming Ramadan have significantly impacted the supply rhythm. The SIMBARA system's crackdown on "non-compliant" nickel ore has further exacerbated supply challenges. Additionally, the rise in local fuel costs in Indonesia has increased land transportation costs.

In terms of demand, after February's inventory replenishment, downstream pyrometallurgy smelters have moved past the pre-holiday critical inventory shortage of less than one month. However, inventory replenishment remains incomplete, and active raw material procurement has driven premiums upward to some extent. For hydrometallurgy ore, the continuous ramp-up of MHP projects in H1 and the commissioning of new projects in Q3 and Q4 have created an imbalance between downstream demand for hydrometallurgy ore and the insufficient market circulation volume, leading to a faster price increase for hydrometallurgy ore compared to pyrometallurgy ore.

Additionally, the market remains cautious about the uncertainty surrounding the annual RKAB policy.

In summary, SMM expects Indonesian ore prices to fluctuate upward in the short term, with domestic trade premiums on Sulawesi Island exceeding $20 in March. In the medium and long-term, the tight supply rhythm of nickel ore throughout the year is likely to persist.

High-Grade NPI

High-Grade NPI Supply Disruption Leads to Stronger Market Expectations and Rising Prices
The Indonesia NPI FOB index increased by $1.8/mtu WoW. This week, high-grade NPI prices continued to rise. In Indonesia, some production areas operated at low capacity due to changes in production management, while other smelters still maintained some profitability, keeping production incentives intact. Overall production is expected to decline.

Demand side, the downstream stainless steel market resumed operations after the holiday, with market transaction sentiment gradually improving. However, as stainless steel mills had stocked sufficient raw materials earlier, their purchase willingness for high-grade NPI was weak during the week.

Cost side, Indonesian nickel ore premiums rose, and high-grade NPI prices are expected to remain relatively stable with a strong trend in the short term, supported by costs.

Based on nickel ore prices from 25 days ago, the cash cost of high-grade NPI smelting narrowed losses during the week.

Raw material side, prices of auxiliary materials, including coking coal and coke, fluctuated downward this week. Upstream inventory remained in a buildup phase, while downstream demand showed some improvement but remained weak. Prices of coking coal, coke, and thermal coal continued to decline this week.

Ore side, after the rainy season in the Philippines, both nickel ore shipments and demand remained weak, with prices primarily stable.

The narrowing of smelter losses this week was mainly due to the continued rise in high-grade NPI prices, with the upward momentum further expanding. Meanwhile, auxiliary material costs continued to ease.

Looking ahead to next week, auxiliary material prices may bottom out and are expected to recover as downstream demand improves. Nickel ore prices are expected to remain strong and stable. With stronger market expectations for high-grade NPI, smelter losses are likely to narrow further.

REFINED NICKEL

One project in Indonesia is still ramping up production

This month, the Dingxin project in Indonesia continued full-capacity production, supplying 4,000 mt of refined nickel to the market monthly. Additionally, the Yongheng project is in the process of ramping up production and is expected to reach full capacity (4,000 mt/month) in March-April.