Entering Q4, the nickel ore supply constraints from H1 are easing. The initially approved RKAB production volume for 2026 was 260 million to 270 million mt, significantly lower than the 2025 quota level. As of late September, the Ministry of Energy and Mineral Resources has successively approved revised RKABs. The clearest signal is that laterite nickel ore premiums turned negative for the first time in this cycle.
From August 28 to September 28, the SMM Indonesia 1.6% grade nickel ore delivered price fell from $65.8/wmt to $63.4/wmt. Over the same period, HMA fell only 1.54% to $16,698/mt, contributing $0.9/wmt of the decline; according to SMM calculations, the remaining $1.5/wmt came from premium changes. The 1.6% grade premium compressed from $1.52/wmt to $0.02/wmt, the 1.5% grade is now flat with the HPM of $58.5/wmt, and the 1.4% grade is $2.03/wmt below HPM. After deducting barge freight, the prices realized by 1.5% and 1.6% grade mines on an FOB basis are already clearly below HPM.
Limonite ore is moving in the same direction. Ministerial Decree No. 363.K/MB.01/MEM.B/2026, effective September 15, lowered the 1.2% grade HPM from $44.97/wmt to $24.89/wmt. The current 1.2% grade delivered price is $26.5/wmt. As revised RKAB ore volumes enter the market, SMM expects ore prices to converge toward the new benchmark. The demand side offers no support either. High sulfur costs are squeezing margins, the MHP nickel-cobalt payable indicator remains weak, HPAL production has not shown significant growth, and producers lack the incentive to raise operating rates before year-end.
Weather factors are pressuring both supply and demand simultaneously. Under the influence of a very strong El Niño, BMKG expects the rainy season to be delayed in 61.08% of the country. The mining and barging window has therefore been extended, and smelters have also lost the reason to stockpile ahead of the rainy season. The same drought is also compressing demand. Since September 22, water shortages have forced some RKEF production lines at IMIP to cut production. SMM estimates that if this persists for half a month, NPI production will decrease by 50,000 to 70,000 mt. Just as mineable ore volumes are increasing, smelting demand is contracting.
Overall, SMM expects saprolite ore prices to remain under pressure in October, with negative premiums for 1.5% and 1.6% grades gradually widening; 1.2% grade limonite ore prices will also decline further. Confidence is relatively high for the saprolite ore outlook and moderate for limonite ore, with quota releases, extended mining windows, and smelting production cuts all pointing in the same direction. Given that HMA has been revised down for two consecutive periods, SMM expects the October HPM to fall further, adding additional benchmark price pressure on both limonite and saprolite ore prices.
![[SMM Analysis] Negative Premium Arrives: RKAB Release and a Delayed Rainy Season Push Indonesian Saprolite Below HPM](https://imgqn.smm.cn/usercenter/qLeLR20251217171733.jpg)
