【SMM Analysis】Weekly Review of Indonesian Nickel Market - 5.16

Nickel Ore

Rebound of HPM Prices, Resulting an Increase of Indonesian Pyrometallurgical Ore Prices

Pyrometallurgical Ore

According to SMM, the mainstream premium for Indonesia's domestic trade in laterite nickel ore remained steady this week at $26–30 per wet metric ton. In terms of pyrometallurgical ore prices, a slight rebound was observed for Indonesia's HPM in the second half of the year, driven by a rise in LME nickel prices. As a result, the price of pyrometallurgical-grade ore saw a modest increase. SMM reports that the delivered price for 1.6% nickel content laterite ore in Indonesia stands at $53.3–57.3 per wet metric ton, up $0.7 from last week, representing a 1.2% increase. Meanwhile, hydrometallurgical-grade ore prices remained unchanged, with 1.3% nickel content ore continuing to trade at $23–25 per wet metric ton. On the supply side for pyrometallurgical ore, operations in Sulawesi continue to be disrupted by rainfall, while Halmahera Island has entered its rainy season as of May. Additionally, some Indonesian mines have not yet obtained their RKAB (Work Plan and Budget) quotas, limiting mining activities under their IUP (Mining Business License), which further tightens supply. On the demand side, NPI (Nickel Pig Iron) prices continue to decline slowly, pushing production costs for Indonesian pyrometallurgical smelters below acceptable thresholds and limiting their capacity to absorb further increases in ore prices. In terms of inventory, after the low stock levels and aggressive restocking seen in April, smelters now have relatively improved inventory levels and are less willing to purchase ore at prices above market rates. Overall, despite ongoing supply-side challenges such as the rainy season and delays in RKAB approvals, weak downstream demand is likely to constrain this significant price increases in the short term.

Hydrometallurgical Ore

For hydrometallurgical ore, the supply side has not shown signs of significant tightness. However, an incident at the MHP project in the Morowali Industrial Park impacted production in April, leading to reduced local demand for hydrometallurgical ore. As a result, prices have shown signs of weakening. Nonetheless, the production lines in those park are expected to gradually resume operations in May, and SMM forecasts that ore prices may rebound in the upcoming period.

NPI

Intensified Market Tug-of-War May Keep Prices Under Pressure in the Short Term

This week, high-grade nickel pig iron (NPI) prices continued to face downward pressure. On the supply side, Indonesia's domestic trade premiums for nickel ore have remained stable, contributing to rising production costs for smelters. As finished product prices continue to decline, smelter production incentives have weakened, and some production lines have reportedly reduced output. Consequently, Indonesian NPI output is expected to trend downward.

On the demand side, easing trade tensions between China and the U.S. led to a slight recovery in stainless steel futures, and spot market transactions have improved somewhat. However, the actual increase in transaction prices remains limited. Policy effects are still in the early stages of being realized, and leading stainless steel producers had already stocked up on raw materials in advance. As a result, market sentiment for high-grade NPI remains weak, and prices are likely to remain subdued in the short term. From a cost perspective, NPI smelters continue to operate under negative cash margins based on nickel ore prices from 25 days ago. On the raw material side, prices for auxiliary materials weakened slightly this week. While hot metal production remains high, steelmakers are holding large inventories of coke, creating downward pressure on coke procurement prices, which in turn declined slightly this week. Coking coal production increased, and prices also softened. These factors have led to a slight drop in auxiliary material costs for smelters.

Regarding nickel ore, the rainy season in the Philippines ended around 25 days ago, leading to a rise in shipments. However, tight supply in Indonesia has propped up demand and prices for Philippine nickel ore, maintaining smelters’ ore procurement costs. Despite these dynamics, NPI smelters continue to face negative margins. Looking ahead to next week, auxiliary material prices may weaken further due to cautious procurement by steelmakers. Meanwhile, high premiums in Indonesia are expected to support stable pricing for Philippine ore. Ultimately, losses at high-grade NPI smelters are likely to persist.