【SMM Analysis】Weekly Review of Indonesian Nickel Market - 5.9

Nickel Ore

Indonesian Pyrometallurgical Ore Prices Rise Again, Diverging from Hydrometallurgical Ore Prices

This week, prices for Indonesian ores have seen a modest increase. In the pyrometallurgical ore segment, the mainstream premium for Indonesian domestic ore in May ranges from USD 26 to 30 per wet metric ton (WMT). According to SMM, the delivered price for 1.6% grade Indonesian domestic pyro ore is between USD 52.6 and 56.6/WMT, marking a week-on-week increase of USD 1/WMT, or a rise of 1.87%.

In contrast, the hydrometallurgical ore segment has seen declining market prices. The delivered price for 1.3% grade Indonesian domestic hydro ore, according to SMM, is between USD 23 and 25/WMT, down by USD 2/WMT, a decrease of 7.69%.

Pyrometallurgical Ore:
On the supply side, this year's prolonged rainy season continues to impact production. Although rainfall in Sulawesi has slightly improved, it remains ongoing. Meanwhile, Halmahera Island is also entering its rainy season in May, with frequent precipitation disrupting ore transportations. Additionally, the implementation of the PNBP policy has raised the cost of nickel ore sales, prompting strong price-holding sentiment from mining companies.

On the demand side, although NPI (Nickel Pig Iron) prices continue to decline, downstream smelters still maintain relatively low nickel ore inventories, sustaining a level of rigid demand. Furthermore, market concerns about the approval status of supplemental RKAB quotas continue to fuel strong nickel ore procurement sentiment. As prices rise, downstream NPI enterprises face increasing pressure.

Hydrometallurgical Ore:
Impacted by reduced MHP (Mixed Hydroxide Precipitate) production in April, downstream smelters have been attempting to lower hydro ore purchase prices. Following the Labor Day holiday, hydro ore market transaction prices declined, although MHP profitability remains strong. SMM forecasts that as MHP projects in the Morowali industrial park resume production throughout May and with new hydro projects planned for the second half of the year, hydro ore prices may see a rebound.

NPI

Following the Labour Day holiday period, the high-nickel pig iron (NPI) market continues to experience downward pressure. Currently, the premium on Indonesian nickel ore remains relatively stable, providing strong cost support for smelters. However, with finished product prices continuing to decline and smelters facing increased losses, some production lines have begun adjusting their operating rates, leading to expectations of a potential decrease in overall output.

On the demand side, major stainless steel producers have already stockpiled sufficient raw materials. In the context of ongoing cost inversion in the stainless steel sector, mainstream mills are showing low willingness to procure additional raw materials, and procurement prices remain weak. As such, high-nickel pig iron prices are expected to remain under pressure in the short term.

From the cost perspective, smelters are experiencing deeper negative cash margins. Regarding raw materials, auxiliary material prices have generally remained stable, and the supply-demand balance in the coke market is relatively even, offering price support and keeping smelters’ auxiliary costs steady. In terms of ore, although the rainy season in the Philippines has ended and shipment volumes have increased, tight supply of Indonesian nickel ore has supported Philippine ore prices, keeping nickel ore costs for smelters stable to slightly stronger.

Nevertheless, the rapid post-holiday decline in high-nickel pig iron prices has significantly intensified the overall cost inversion. It is anticipated that, supported by downstream demand, auxiliary material prices will remain stable in the coming week, while nickel ore prices are likely to stay firm to slightly stronger in the short term. Smelter losses may therefore continue to widen.