【SMM Analysis】Weekly Review of Indonesian Nickel Market-3.28

NICKEL ORE

The tight supply of Indonesian ore continues, and pyrometallurgical ore prices may rise again

Current market transaction prices: SMM's weekly price for Indonesia's local pyrometallurgical ore at 1.6% is $51/wmt, while the weekly price for hydrometallurgical ore at 1.2% is $26/wmt. Indonesian pyrometallurgical nickel ore may see another increase in April, with current April premiums under negotiation at $23-25. Hydrometallurgical ore CIF prices may remain stable but fluctuate downward. Supply side, this year's prolonged rainy season in Sulawesi has impacted nickel ore mining and transportation, with slower recovery in supply from major mining areas like Sulawesi. Additionally, the Indonesian Lebaran holiday from late March to early April will also affect nickel ore supply as mines and workers take time off. Demand side, raw material inventories at Indonesian nickel pig iron smelters are generally low, necessitating restocking, coupled with expectations for increased NPI production, demand-side support remains. SMM expects nickel ore supply to remain tight. Policy side, expectations for the implementation of the PNBP policy remain strong. If implemented, sales costs for nickel ore mines will increase, and with current rising NPI and MHP prices, mines have strong bargaining power. The cost increase from this policy may largely be passed on to downstream enterprises, providing strong support for nickel ore prices. Hydrometallurgical ore side, downstream MHP faces strong expectations for production cuts in the short term, with demand support significantly weakening, and prices may fluctuate downward. Overall, SMM expects Indonesia's local pyrometallurgical nickel ore prices to continue rising, while hydrometallurgical ore prices may remain stable but fluctuate downward.

High-Grade NPI

The supply increment of high-grade NPI may be limited, and short-term prices are expected to remain relatively stable.

The Indonesian NPI FOB index increased by $0.7/mtu WoW. This week, high-grade NPI prices further rose. In Indonesia, the Morowali Industrial Park was affected by heavy rainfall, leading to severe flooding, but it had no impact on pyrometallurgical smelters. Overall production in Indonesia still maintained a slight increase. Demand side, the destocking of stainless steel social inventory was slow, and the purchase willingness of stainless steel mills for raw materials was weak. However, traders had strong expectations for the future market, leading to substantial purchases during the week, which further tightened the market's available resources. It is expected that high-grade NPI prices will continue to be relatively stable with a strong trend in the short term.

During the week, high-grade NPI prices further increased due to the tightness of market available resources and the expectation of rising costs. In terms of refined nickel, on the macro front, the uncertainty of tariffs and geopolitics was strong. During the week, non-ferrous and precious metal prices first pulled back and then continued to rise, while nickel prices fluctuated. On the news front, the flooding in Indonesia affected the production of hydrometallurgical projects in the Morowali Industrial Park, and the expected cost of refined nickel is likely to continue to rise, leading to a renewed strength in refined nickel prices that had previously started to pull back. During the week, high-grade NPI fluctuated at a discount to refined nickel. In the short term, the cost support for high-grade NPI is further strengthening, while the supply side is limited by tight ore supply, and prices are expected to remain strong. From the perspective of nickel prices, the marginal situation of US tariffs may continue to strengthen, which could be favorable for non-ferrous metals, and nickel prices may continue to recover upward. Cost side, the increase in ore prices and the rise in intermediate product coefficients have further pushed up the cost line of refined nickel. It is expected that next week, the average discount of high-grade NPI to refined nickel may slightly narrow.

25 days ago, nickel ore prices remained stable, and the profit of high-grade NPI slightly recovered. Based on the cash cost of high-grade NPI calculated from nickel ore prices 25 days ago, the profit of high-grade NPI smelters recovered during the week. Raw material side, this week, the prices of auxiliary materials further declined due to the negative feedback from the weakening of downstream black steel prices, leading to a downward shift in the cost line of auxiliary materials for high-grade NPI smelters. From the ore side, 25 days ago, the Philippines was still in the rainy season, and only some mines were producing, keeping prices stable. This week, smelter profits basically recovered. It is expected that next week, auxiliary material prices may continue to weaken, while nickel ore prices may slightly increase. High-grade NPI prices may further rise with cost support but with limited space, and it is expected that the profit of high-grade NPI smelters may slightly weaken next week.

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.