【SMM Analysis】Weekly Review of Indonesian Nickel Market-3.14

NICEKEL ORE

Frequent Policy Changes on Indonesian Ore Side, Costs and Sentiment Likely to Strengthen

Current market transaction prices: For pyrometallurgical ore, the mainstream premium price of Indonesian nickel ore on Sulawesi Island is $19-21/wmt. The delivery-to-factory price range for SMM laterite nickel ore in the Indonesian market with 1.2% grade is $25.5-27.5/wmt, while for 1.6% grade, it is $46.5-51.5/wmt. In the first half of March, the HPM price for 1.2% grade nickel ore was $15.49/wmt, and for 1.6% grade nickel ore, it was $27.01/wmt. The HPM price for the second half of March will be announced around March 15.

In terms of supply and demand, the structure remains unchanged compared to last week. In terms of supply, as the rainy season gradually ends, supply is still expected to improve. On the demand side, smelters continue to make just-in-time procurement, with shipment activity steadily recovering during the week.

Regarding inventory, downstream smelters maintain relatively low inventory levels.

Procurement demand remains. The supply side has slightly loosened, but market concerns over nickel ore supply persist due to policy uncertainties. With downstream smelters maintaining a slow increase in nickel ore demand and inventory levels still relatively low, SMM expects that although supply is expected to continue increasing, price support will remain under the ongoing strong supply and demand dynamics.

On the policy front: Following changes to the HPM pricing formula and foreign exchange control policies, the nickel ore royalty increase currently under discussion is strongly expected to be implemented within the year. If enacted, it will directly lead to a significant increase in mining costs. With sellers in the nickel ore market holding strong bargaining power, the additional costs caused by the royalty are likely to be largely passed on to downstream buyers, resulting in higher nickel ore prices.

High-Grade NPI

High-Grade NPI Prices Transmitted Downstream, Prices Expected to Fluctuate Upward in the Short Term
The Indonesian NPI FOB index increased by $2.1/mtu WoW. This week, high-grade NPI prices continued to rise.

Supply side, domestically, the release of Philippine nickel ore still requires time, and domestic smelters mainly consumed previous inventories, with production remaining at low levels. In Indonesia, smelters' nickel ore inventories stayed low, and production ramp-up faced challenges. Additionally, a major smelter continued to operate at low capacity. With the release of some new capacity, total production saw a slight increase.

Demand side, the stainless steel market showed strong sentiment for taking orders during the week, with finished product prices hitting consecutive new highs. Stainless steel mills' procurement sentiment for raw materials improved, and transaction prices reached new highs during the week.

Cost side, based on nickel ore prices from 25 days ago, the cash cost of high-grade NPI smelting remained in a loss-making position during the week.

Raw material side, auxiliary material prices stabilized after halting their decline during the recovery phase of the commodity market in March, with NPI auxiliary material costs holding steady during the week.

Ore side, Philippine nickel ore prices rose slightly due to limited supply during the downstream procurement cycle. The loss margin for smelters narrowed slightly compared to last week.

Looking ahead to next week, auxiliary material prices are expected to remain stable temporarily. However, nickel ore prices may rise due to the impact of the rainy season in the Philippines. With tight market circulation of high-grade NPI, prices are likely to continue rising, and smelters' profit losses may further narrow.

In summary, SMM expects high-grade NPI prices to remain relatively stable with a strong trend in the short term.

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.