【SMM Analysis】Weekly Review of Indonesian Nickel Market - 6.20

Nickel Ore

"Indonesia's Nickel Split: Benchmark Prices Fall But High-Grade Saprolite Commands Steep Premiums"

This week saw mixed price movements in Indonesia's domestic nickel ore market. While premiums for laterite nickel ore remained stable at $26-28/wet metric ton, the benchmark HMA price for the second half of June declined slightly by 1.19% to $15,221/ton, contributing to an overall softening in pyrometallurgical ore prices. Specifically, 1.6% Ni ore prices decreased by $0.4/wmt to $53.9-56.9/wmt, while 1.3% Ni hydrometallurgical ore held steady at $26-28/wmt.

• Pyrometallurgical Ore:

From the supply side, persistent rainy seasons in Sulawesi and Halmahera continue to constrain mining and transportation activities. Although supplementary RKAB quotas have begun approval in H2, no substantial quota increases have materialized yet, with the sluggish approval process exacerbating the supply tightness for saprolite ore. On the demand side, pressures from NPI market continues as SMM's Indonesia NPI prices declined further this week, maintaining smelters' cost inversion predicament. Stainless steel mills' procurement sentiment weakened amid production cuts at some smelters. Nevertheless, facing acute ore shortages, Indonesian smelters are compelled to accept elevated prices despite operating at losses to sustain production.

• Hydrometallurgical Ore:

On the supply side, although rainy season persists, supply remains relatively stable. Demand is strengthening with the restart of most HPAL projects in the Morowali park and expectations for two major HPAL projects commencing operations in the second half of 2025, pointing to potential substantial demand growth. Market outlook suggests Indonesian hydrometallurgical ore prices may trend stronger in the near term.

NPI

"Deepening Supply-Demand Imbalance Signals Extended Weakness for Nickel Iron Prices"

This week, the average price of 8-12% high-grade nickel pig iron (NPI) declined by 16.8 yuan per nickel point to 925.5 yuan per nickel point (ex-factory, tax-included), continuing its weak trend. From the supply side, Indonesian premiums for pyrometallurgical nickel ore remain firm, imposing significant cost pressures on smelters. Despite the lower economic viability of nickel matte compared to hydrometallurgical intermediates, Indonesian RKEF production lines continue to prioritize NPI as their primary output, sustaining expectations for production growth. From the demand side, stainless steel futures and spot prices have underperformed, with slow inventory drawdowns and subdued procurement interest from mills. There is a weak inquiry volumes and declining transaction price expectations. This negative feedback loop is projected to persist in the near term, maintaining downward pressure on NPI prices. From 25 days ago, nickel ore prices remained elevated, which further exaverbating smelter cost-price inversion. This week, auxiliary material prices have stabilized at low levels, easing some cost pressures for smelters. However, Philippine nickel ore shipments to Indonesia have increased, keeping ore prices firm. The primary driver of worsening smelter losses this week has been the continued decline in finished product prices. For the coming week's outlook, auxiliry materials market prices are expected to maintain stable yet weak trends, with cost structures remaining largely unchanged. Philippines' nickel ore prices are projected to exhibit firm-to-strong momentum, supported by sustained robust downstream demand. In conclusion, the ongoing decline in finished product prices is anticipated to further erode smelter margins, exacerbating existing operational losses.