【SMM Analysis】Weekly Review of Indonesian Nickel Market - 6.6

Nickel Ore

"Ore Price Regain this Week"

According to data from SMM, Indonesian nickel ore have seen slight increase this week. The mainstream premium for domestic trade laterite nickel ore in Indonesia held steady at USD 26–30/wmt. In terms of pyrometallurgical-grade ore, SMM reports that the delivered price of 1.6% nickel content laterite ore for domestic trade in Indonesia remained in the range of USD 54.3–57.3/wmt, an increase of USD 0.5/wmt compared to last week. For hydrometallurgical-grade ore, the delivered price of 1.3% nickel content laterite ore is at USD 25-27/wmt, representing a USD 2/wmt increase from last week.

• Pyrometallurgical Ore

On the supply side, frequent rainfall in Sulawesi and Halmahera continues to disrupt mine shipments and constrain supply. As we enter the second half of the year, supplemental RKAB quotas have started to be approved; however, these remain insufficient to significantly ease the tight supply situation. Some miners, after receiving quotas, have raised their tender prices to new highs, further fueling short-term bullish sentiment. Looking ahead, the market remains concerned about the pace of RKAB supplemental quota approvals.

On the demand side, Indonesian NPI smelters are still facing cost inversion and have limited tolerance for rising nickel ore prices. However, smelters' inventory levels remain generally low, sustaining a rigid procurement demand. Overall, despite downstream pressure, supply remains tight, and mines retain strong pricing power. Competitive bidding among smelters is common. Looking ahead, June premiums have already been settled, and pyrometallurgical ore prices are expected to remain stable in the short term. If the new incentive mechanisms are introduced, procurement prices could potentially rise further.

• Hydrometallurgical Ore

On the supply side, significant changes in the ore availability did not exist. On the demand side, certain HPAL projects in the Morowali industrial park, previously affected by flooding, have resumed thier production. Prices for hydrometallurgical ore in June have recovered to price in March levels. Looking forward, two large-scale HPAL smelting projects are expected to commence operations in the second half of the year, contributing to a clear increase in future demand for hydrometallurgical ore. Additionally, with Halmahera entering the rainy season, cross-island procurement demand is expected to rise. Overall, hydrometallurgical ore prices are likely to remain on an upward trajectory, with limited downside risk.

NPI

"Stainless Steel Market Weakness Persists; Raw Material Prices Likely to Soften"

Nickel pig iron (NPI) prices faced pressure this week despite a slight increase. In Indonesia, firm domestic ore premiums continue to weigh on smelter costs. While weak NPI prices are prompting some high-cost production lines to reduce output, overall production may see a slight uptick due to limited profitability in high-grade nickel matte. On the demand side, the stainless steel market remained subdued following the Dragon Boat Festival holiday. Major steelmakers showed limited willingness to accept higher raw material prices, and procurement levels remained flat. Given the combination of rising supply and weak demand, NPI prices are expected to soften in the short term.

Looking back of 25 days, a rise in nickel ore prices has further deepened the cost inversion for NPI smelters. Finished product prices have weakened, exacerbating profitability challenges. Meanwhile, prices of auxiliary materials such as coke and coal remain weak amid high inventory levels at steel mills, and smelters are seeing some relief in these input costs. From the ore perspective, Indonesia’s strong demand for mid-to high-grade Philippine ore continues to support ore prices. However, abundant rainfall in the Philippines is limiting supply, keeping smelter ore costs elevated. Looking ahead to next week, auxiliary material prices are expected to remain soft, but with NPI prices potentially declining further, cost inversion pressures on smelters may continue to intensify.