【SMM Analysis】Weekly Review of Indonesian Nickel Market - 7.25

Nickel Ore

"Another Decline in Indonesian Domestic Nickel Ore Prices Amid Active Selling by Miners"

Nickel ore prices in Indonesia slightly dipped this week. The mainstream premium for Indonesian laterite nickel ore 1.6% remained at $24–26/wmt. SMM's delivered price for 1.6% laterite nickel ore stood at $50.4–53.7/wmt, dropped USD 0.1 from last week. Meanwhile, SMM’s delivered price for 1.3% ore also remained stable at $26–28/wmt, unchanged week-on-week.

• Pyrometallurgical Ore:

On the supply side, the rainy season in Sulawesi has generally improved, while rainfall in Halmahera remains persistent. In addition, some mining companies have been actively selling their products this week, leading to a modest recovery in output. Based on SMM's understanding, the currently approved RKAB quota is estimated at around 290 to 300 million tons. On the demand side, although Indonesian NPI prices have slightly declined, procurement demand for pyrometallurgical ore remains weak due to continued production cuts or shutdowns by some smelters facing cost inversion.

Overall, with the ongoing progress of RKAB approvals and improving weather conditions in parts of Sulawesi, the previously tight nickel ore supply in Indonesia has eased somewhat. Meanwhile, demand has decreased due to reduced smelter operations. Looking ahead, pyrometallurgical ore prices are expected to remain under downward pressure.

• Hydrometallurgical Ore:

Supply and demand remain relatively stable. From a profitability standpoint, hydrometallurgical ore generates lower margins compared to pyrometallurgical ore, resulting in slightly limited market availability. This has contributed to sustaining prices at an elevated and stable level throughout the week. However, with continued RKAB quota approvals expected through August and improving weather conditions in parts of Sulawesi, there is still room for a price decline in hydrometallurgical ore.

NPI

"High-Grade NPI Prices Reach Turning Point, Upward Momentum Strengthens"

The average price of SMM 8–12% high-grade NPI (ex-works, tax included) rose by RMB 5.2/nickel point from last week to RMB 906.2/nickel point, while Indonesia's NPI FOB index price increased by USD 0.78/nickel point to USD 110.64/nickel point. This week marked a turning point for high-grade NPI prices, with increased inquiry activity. On the supply side, Philippine nickel ore prices softened during the week, but this failed to reverse the cost inversion at Chinese smelters, whose production remains low and stable. With high production costs and stabilizing prices, many companies are reluctant to sell and prefer to hold inventory. In Indonesia, nickel ore premiums slightly weakened, though the decline was limited. While smelter cost lines remained stable and cost inversion eased slightly, output is still expected to decline for some producers, potentially weakening overall production. On the demand side, improved macro sentiment supported stainless steel prices, offering some price support for high-grade NPI, while market inquiries increased and trade prices rebounded modestly. Overall, bearish sentiment around high-grade NPI has eased somewhat, and prices are expected to slowly trend upward.

Based on nickel ore prices from 25 days ago, smelter cash cost inversion weakened this week. For raw materials, auxiliary material prices remained firm to slightly stronger, supported by ongoing domestic "anti-involution" policies and the rebound in black commodity prices. Smelters' auxiliary material cost lines continued to trend stronger. On the nickel ore side, Philippine shipment volumes increased, but downstream price acceptance was weak, suggesting potential further softening in ore prices; smelters’ ore cost lines remained weak and stable. The reduced cost inversion this week was driven mainly by the rebound in finished product prices. Looking ahead to next week, auxiliary material prices are likely to continue rising, keeping cost lines firm, while nickel ore cost lines may edge lower if ore prices continue to soften. Smelter profit margins are expected to further improve as cost inversion continues to ease.