- Lower ore prices could reduce NPI, stainless steel production costs
- Ore supply expected to improve amid additional RKAB approvals
Indonesia’s nickel ore prices came under pressure in early October, with both the Nickel Reference Price (HMA) and Nickel Ore Reference Price (HPM) declining, while spot saprolite prices fell by around 6-7% in a single day. The sharper correction in spot prices reflects improving supply expectations and easing concerns over nickel ore availability.
However, the decline in ore prices has yet to translate into a significant reduction in nickel pig iron (NPI) and stainless steel production costs, with the market closely watching how quickly lower ore prices are reflected in NPI pricing.
Indonesian nickel HMA falls 2.25%
Indonesia’s Ministry of Energy and Mineral Resources (ESDM) set the nickel HMA for the first half of October at $16,322.67/t, down $375.33/t, or 2.25%, from $16,698/t in the second half of September.
The revised HMA has also influenced the HPM for nickel ore, resulting in lower reference prices across different ore grades. The HMA for cobalt was set at $41,047.33/t, while iron ore and chrome ore were set at $1.45/t and $6.37/t, respectively.
Saprolite HPM declines around 4%
The HPM for saprolite ore, a key raw material for NPI used in 300-series stainless steel production, also declined during the first half of October.
The HPM for 1.4% nickel saprolite was set at $51.66/wet metric tonne (wmt), down $2.17/wet t, or around 4%, from the previous period. The HPM for 1.5% nickel ore declined by $2.28/wet t, or around 3.9%, to $56.22/wet t, while the 1.6% grade fell by $2.39/wet t, or around 3.8%, to $61/wet t.
Indonesia introduced a revised nickel ore HPM formula in September. The new mechanism incorporates not only nickel grade and HMA but also the prices of associated minerals such as iron, cobalt and chromium, along with moisture content.
Spot saprolite prices fall 6-7%
Spot nickel ore prices have declined considerably faster than the official HPM. According to Shanghai Metal Market (SMM), the average price of 1.4% saprolite nickel ore delivered to Indonesian ports fell to $48.70/wmt on 1 October, down $3.10/wet t, or around 6%, from the previous day.
The 1.5% grade declined by $4.20/wet t, or 7.18%, to $54.30/wet t, while 1.6% ore fell by $4.30/wet t, or 6.78%, to $59.10/wet t. The 1.6% saprolite price on an FOB Indonesia basis also declined by $4.30/wet t, or 7.49%, to $53.10/wet t.
Improving supply weighs on spot market
The sharper correction in spot prices comes amid improving mining and shipping conditions in Indonesia. Continued dry weather has supported mining activity, while additional approvals under the RKAB system have increased expectations of improved ore supply.
As supply concerns ease, the premium for saprolite over the official HPM has started to narrow. The simultaneous decline in HMA, HPM and spot prices has added further downward pressure to nickel ore values.
NPI cost impact remains key for stainless steel
Lower saprolite prices could eventually reduce NPI production costs, particularly for producers supplying the 300-series stainless steel industry. However, the impact on actual NPI prices may not be immediate, as other production costs and market conditions continue to influence producer margins.
The key question for the stainless steel market is how quickly the sharp decline in nickel ore prices will be reflected in NPI offers and production costs. Any sustained reduction in NPI costs could provide some relief to stainless steel producers, although the extent of the impact will depend on the duration of the ore price correction.
Outlook
Indonesian nickel ore prices are likely to remain under pressure in the near term if ore availability continues to improve and saprolite premiums narrow further. The market will closely monitor subsequent HMA and HPM revisions, RKAB approvals and spot ore availability.
For the stainless steel sector, attention will remain focused on whether lower saprolite prices translate into weaker NPI costs and, subsequently, lower raw-material costs for 300-series stainless steel production.
Note: This article is published as part of a content exchange agreement between SteelDaily and BigMint.
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