[SMM Analysis] Impact of Sulfur Price Changes on Nickel Price

Currently, Sulfur (CIF Indonesia) Price has exceeded $530/mt . In the smelting process of MHP, sulphur is a key auxiliary material with a unit consumption of around 11.8 mt. In the full cost calculation for MHP after cobalt conversion in November, the total processing cost was $10,262/mt Ni, comprising ore cost of $2,944, sulphur cost of $5,568, and cobalt value can offset $4,684 cost. Currently, sulphur cost has surpassed both ore cost and cobalt credit, becoming a crucial component of MHP costs, and may further impact downstream refined nickel prices through MHP costs. Looking ahead to this year's market, due to restricted sulphur production in Russia, mainstream Middle Eastern cargoes currently dominate. With phosphate fertiliser demand gradually being released in countries and regions such as Indonesia, Brazil, and Africa, and Indonesian MHP projects having sulphur stockpiling needs, traders' bargaining power has significantly increased, driving sulphur prices higher.Sulfur (CIF Indonesia) Price has climbed from $250/mt in early March to an average of $535/mt Ni this week.

According to SMM analysis, the average cost of MHP in November was $10,262/mt Ni, while the average cost of high-grade nickel matte was $12,797/mt Ni, resulting in a cost gap of $2,535/mt Ni. The average price of MHP in November was $13,126/mt Ni, and the average price of high-grade nickel matte was $13,409/mt Ni, with a price gap of $283/mt Ni. The processing fee for MHP to nickel sulphate was 15,500 yuan/mt Ni, and for MHP to high-grade nickel matte was 11,000 yuan/mt Ni, with a processing fee gap of approximately $635/mt Ni.

For integrated enterprises, processing nickel sulphate using MHP costs $1,900/mt Ni less than using high-grade nickel matte, making MHP more economical as a raw material. For enterprises purchasing externally, processing nickel sulphate using MHP costs $352/mt Ni more than using high-grade nickel matte, making high-grade nickel matte more economical as a raw material.

Based on a unit sulphur consumption of 11.8 mt per mt Ni of MHP, assuming other factors remain unchanged, with the reference monthly averageSulfur (CIF Indonesia) Price in November being $476/mt, when the sulphur price reaches $637/mt, the economic viability of using MHP versus high-grade nickel matte becomes equal for integrated enterprises. When the sulphur price exceeds $637/mt, integrated nickel sulphate producers find it more economical to use high-grade nickel matte as a raw material. When the sulphur price reaches $690/mt, the production costs of MHP and high-grade nickel matte become equal for raw material producers.

If sulphur prices rise further, coupled with increasing ore costs, the rising costs of MHP and high-grade nickel matte will provide cost support for downstream refined nickel products, transmitting upward pressure on nickel prices.

SMM will continue to monitor sulphur prices and their impact on the nickel industry.