【SMM Analysis】Weekly Review of Indonesian Nickel Market-4.18

NICKEL ORE

Indonesian ore supply tightness remains the main theme, with prices holding up well.

Indonesian ore prices remained stable and strong this week, while nickel prices experienced a pullback. The expected implementation of the PNBP policy and macro factors provided some support to prices. Transaction prices remained generally stable this week. In the Indonesian market, the mainstream premium for pyrometallurgical ore continued at $24-26, with a 1.6% delivery-to-factory price of $51.5-53.5/wmt. For hydrometallurgical ore, the 1.3% delivery-to-factory price of Indonesia's local ore was around $25-26/wmt.

From a supply and demand perspective, for pyrometallurgical ore: On the supply side, the prolonged rainy season on Sulawesi Island, with frequent rainfall during the week, has impacted nickel ore mining and transportation. However, overall, rainfall in Indonesia is expected to gradually decrease from April, with an anticipated increase in nickel ore supply. On the demand side, downstream NPI prices were hit by the decline in nickel prices due to Trump's tariff policy, with NPI prices falling significantly during the week, weakening support for nickel ore prices. However, the April premium has already been set, and any subsequent adjustments will require negotiations at month-end for the May premium. In terms of inventory: raw material inventories at Indonesian nickel-iron smelters are generally low, and there remains a need for restocking based on rigid demand.In addition to the slight increase in NPI production in Indonesia within the month, demand support remains. Overall, SMM expects that the supply of pyrometallurgical ore in Indonesia may continue to be tight. For hydrometallurgical ore, supply side, the tight supply situation of hydrometallurgical ore was not obvious during the week. Demand side, the accident at the hydrometallurgical project in the large K park affected the demand for MHP in April. Overall, the supply in the hydrometallurgical ore market is relatively sufficient. Policy side, Indonesia's PNBP policy was implemented this week, tentatively starting on the 26th. The increase in royalties has raised the sales cost of nickel ore, but the significant increase in premiums at the beginning of April has already taken into account the impact of the PNBP policy implementation. Looking ahead, this policy may not further drive up nickel ore prices.

Overall, the nickel ore market is currently mixed with both bullish and bearish factors, but the main theme of tight supply remains. The future price trend needs to pay attention to the rainy season situation in the large K and small K islands in Indonesia in April. SMM expects that the price of Indonesia's local nickel ore will hold up well in the short term.

High-Grade NPI

The negative feedback from stainless steel extended to the raw material side, with the price decline of high-grade NPI widening.

In Indonesia, the operating rate of smelters remained basically stable compared to previous levels. Due to the implementation of the nickel ore royalty policy in Indonesia, smelters there adopted a wait-and-see approach towards expected production increases, resulting in stable production. Demand side, the destocking of social inventory of stainless steel weakened during the week, with market transactions mainly focused on warrant cargo and some low-priced goods. Stainless steel mills showed weak demand for raw materials, and some top-tier enterprises had already stocked up in advance, leading to a decline in the activity of raw material inquiries. Market transactions during the week were concentrated in some special steel mills and mid-tier stainless steel mills, with significant differences in transaction prices. In the short term, the price of high-grade NPI remained under pressure due to the negative feedback from downstream stainless steel. Cost side, based on the nickel ore price calculated 25 days ago, the losses of high-grade NPI smelters deepened during the week. Raw material side, the prices of auxiliary materials remained stable this week. With the rebound in pig iron production of downstream steel mills and the inventory of coking coal and coke as well as thermal coal at medium to low levels, the cost line of auxiliary materials 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 returned to a loss-making pattern, mainly affected by the rapid decline in spot prices of high-grade NPI. It is expected that next week, the prices of auxiliary materials will remain strongly supported by the increase in pig iron production of downstream steel mills, and the cost line of auxiliary materials will remain stable. Nickel ore side, 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, the price of high-grade NPI may further weaken under the influence of downstream negative feedback, and the losses of smelters will further deepen.