Jakarta forum calls for exploring Ni price references

Market: Metals
09/05/24

The global nickel market should explore different price references for nickel products to reduce price uncertainty, panellists said at the Third Nickel Producers, Processors and Buyers Conference in Jakarta, Indonesia.

The London Metal Exchange (LME) nickel price, which is the global benchmark for class 1 nickel products, has been volatile for years now since LME suspended nickel trading in early March 2022, when prices surged above $100,000/t overnight.

There were hopes late last year that prices would become more stable this year. But the price outlook has been uncertain since the turn of the year, with class 1 prices on the London Metal Exchange (LME) slumping to a four-year low of $15,877.50/t on 6 February on expectations of weak Chinese stainless steel and electric vehicle demand, before rebounding to a six-month high of $19,387.50/t on 26 April because of a delay in Indonesian RKAB mining right approvals and a reviewed forecast suggesting a significant smaller surplus for this year.

There should be a new reference to counter price volatility, some conference participants said, while others suggested decoupling class 1 and 2 nickel prices.

"[Prices are volatile now because] most prices are referenced to class 1, so maybe we can explore further with more price references, like class 2 nickel pig iron (NPI) and mixed hydroxide precipitate (MHP)," Ray Gunara, president-director of Indonesian coal producer Harum Energy, said on 7 May. Harum Energy this year bought a majority stake in an Indonesian nickel processing and refining business.

Most conference participants agreed that a different price reference would help maintain nickel price stability. "[NPI prices now are] difficult to predict because the class 1 [prices] are no longer linked to the product we are selling," Indonesia miner Trimegah Bangun Persada (Harita Nickel)'s president-director Roy Arman Arfandy said. Indonesia is the world's largest nickel producer.

The correlation between the monthly average of the LME class 1 cash official price and Argus' NPI ex-works China index has fallen to close to 0.41 between January and May, from 0.91 in 2023. The correlation between the LME class 1 cash official price and Argus' class 2 nickel benchmark Indonesian Nickel Index (INI) for 10-14pc NPI fob Indonesia was 0.52 between January and May.

Market participants at the conference also expressed hope for more government support. "Currently there is an imbalance between local and foreign investments, so we are hoping that the government can give more support to local players like us," one producer said. Another conference participant said that they would aim to build a precursor cathode active material plant if given more support.

Argus' class 2 nickel INI for 10-14pc NPI fob Indonesia stood at $118.70/mtu on 3 May. The INI for 37pc MHP was at $142.80/mtu fob Indonesia and 70pc matte was at $148.90/mtu fob Indonesia on the same day.

By Sheih Li Wong

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