【SMM Analysis】Weekly Review of Indonesian Nickel Market-4.11

NICKEL ORE

Indonesian ore faces prominent imbalances and significant bargaining in the short term, with limited downside room. Global nickel prices dropped sharply this week, as Trump's tariff policy and PNBP policy expectations resurfaced, causing multiple factors to disturb the market. However, as nickel ore orders for the first half of April were already signed, transaction prices remained stable this week. In the Indonesian market, the transaction price for pyrometallurgical ore (1.6% Indonesian local ore) was around $51-52/wmt, while the price for hydrometallurgical ore (1.3% Indonesian local ore) was around $25-26/wmt, unchanged WoW. The mainstream premium for nickel ore procurement in Sulawesi Island's industrial park in April remained at $24-25, and the CIF price for hydrometallurgical ore stayed in the doldrums.

Supply side, for pyrometallurgical ore: The prolonged rainy season in Sulawesi Island continued to bring frequent rainfall this week, affecting nickel ore mining and transportation. However, overall, rainfall in Indonesia is expected to gradually decrease from April, potentially leading to an increase in nickel ore supply. Demand side: Downstream NPI prices were impacted by the decline in nickel prices due to Trump's tariff policy, with NPI prices falling significantly this week, weakening support for nickel ore prices. Inventory side: Raw material inventories at Indonesian nickel-iron smelters were generally low, necessitating restocking based on rigid demand. Coupled with the expectation of NPI production increases, demand support remains. Overall, SMM expects the supply of pyrometallurgical ore in Indonesia to remain tight. For hydrometallurgical ore: Supply side, the tight supply situation for hydrometallurgical ore was not significant this week. Demand side: Accidents in Sulawesi Island's hydrometallurgical projects affected MHP demand in April. Overall, the hydrometallurgical ore market has relatively sufficient supply.

Policy side: Trump's tariff policy impacted nickel prices, and the decline in downstream nickel product prices and profit margin compression may eventually affect the nickel ore sector, leading to price and premium adjustments. However, Indonesia's renewed speculation on the PNBP policy's implementation, if it materializes next week, could increase royalty costs, raising nickel ore sales costs and providing some support to nickel ore prices.

Overall, the nickel ore sector is currently influenced by mixed factors but maintains a tight supply theme. Future price trends will depend on negotiations between companies and mines on "whether to lower premiums in late April" and the continuation of Indonesia's rainy season. SMM expects Indonesian local nickel ore prices to remain stable in the short term, with limited downside room.

High-Grade NPI

Macro uncertainties are expected to remain strong, and high-grade NPI prices have declined rapidly.

This week, high-grade NPI prices experienced a significant drop. Supply side, in Indonesia, as the Eid al-Fitr holiday ended, smelter production loads gradually recovered, and raw material supplies at smelters were replenished compared to earlier periods. However, due to the ongoing uncertainty surrounding Indonesia's policy on increasing nickel ore tax rates, production in the main producing areas remained stable. Demand side, after the Qingming Festival, the global commodity market entered a short-term downward trend due to the impact of Trump's "reciprocal tariffs" policy. The stainless steel futures market fell to a low level in recent years, and steel mills' expectations for the future market weakened, leading to a cautious sentiment towards raw material procurement. During the week, some traders exhibited heavy panic sentiment, resulting in low-price sell-offs. It is expected that high-grade NPI prices may remain under pressure in the short term. Cost side, 25 days ago, nickel ore prices remained stable, and high-grade NPI profits may have inverted again. Based on the nickel ore prices calculated 25 days ago, the profits of high-grade NPI smelters weakened compared to before the holiday. Raw material side, auxiliary material prices remained stable this week, supported by the rebound in pig iron production at downstream steel mills and the low to medium inventory levels of coking coal, coke, and thermal coal. The auxiliary material cost line for high-grade NPI smelters remained stable this week. Ore side, 25 days ago, the Philippines was in the rainy season, and nickel ore prices remained stable. This week, smelter profits began to weaken, mainly due to the rapid decline in spot high-grade NPI prices. It is expected that next week, auxiliary material prices may remain strongly supported by the increase in pig iron production at downstream steel mills, and the auxiliary material cost line will remain stable. In terms of nickel ore, due to the still tight supply of nickel ore in the Philippines, nickel ore prices remained stable 25 days ago. It is expected that next week, smelters may enter a loss-making state again as high-grade NPI prices are expected to weaken.

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.