Weak NPI price until end of 2024F; looming risk of surplus supply

A typical September-October peak season for stainless steel has failed to materialize, with both stainless steel and nickel pig iron (NPI) prices continuing to drive downwards. This downturn is largely attributable to rising production in recent months, combined with weak downstream demand and tightened exports, following imposition of anti-dumping measures and tariffs. Consequently, stainless steel inventories have surged.
Key Concerns:

- Oversupply against Weak Demand: Stainless steel demand has shown no signs of recovery, while supply remains ample. While there were disruptions in Indonesia's NPI production, resulting from delayed ore mining quotas, these have exerted minimal impact. Steep NPI inventory levels have cushioned supply shortfalls, as seen in a decrease in NPI days of inventory, from 60 days in February 2024 to 40 days in August 2024. Had Indonesia supply not been disrupted this year, the situation would probably be worse than what we see now.
- China's Monthly Supply Deficit insufficient to affect NPI price: China's NPI production is down compared to 2023, while Indonesian production has also been constrained by nickel ore shortages. Despite the resulting supply deficit in China, NPI prices have hovered around USD 14,000/t, due to ample inventory levels. A firsthalf shortage in nickel ore failed to lift prices, and with new production capacity coming online, the oversupply threat may worsen.
- Challenging NPI Outlook: The Indonesian government's approval of most mining quotas for the quarter is expected to ease ore supply shortfalls. With 8 new NPI lines scheduled to be commissioned by year-end, alongside declining nickel ore prices, NPI prices could indeed fall below USD 14,000/t in Q4 2024.

In this environment, we remain wary about the nickel sector, given the risk of persistent

Maintain Underweight

We maintain an UNDERWEIGHT rating on Nickel sector, and yet still foresee a headwind rather than a tailwind in the sector, as early this year an admittedly tight nickel ore situation was not powerful enough to push up nickel prices. Many Indonesian projects are ongoing, adding risk of higher supply down the road, while fresh demand might not outpace growth in supply. We thus maintain our pecking order unchanged, at INCO>NCKL>ANTM. and stick to our 2025F TP for INCO at IDR5,400/sh and NCKL at IDR1,200/sh, upgrading ANTM TP to IDR1,800/sh (was IDR1,680/sh). We adjust our revenue and earnings upward by 3.6%/3.7%/3.8% and 228%/8.3%/8.9% for 2024F/2025F/2026F, respectively, owing to better nickel ore volume and better margin from precious metal division.

Nickel - Can Nickel price hold steady

Nickel - Can Nickel price hold steady

25 September 2024 - 07.00am

Nickel - Can Nickel price hold steady

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