Recent nickel pig iron trade flows to Europe unlikely to last: Anglo American

Recent trade flows of nickel pig iron (NPI) to European stainless steel mills are unlikely to be sustainable going forward, Lucy Parker, base and battery metals strategist at Anglo American, said during a panel discussion at the SMR Stainless Steel conference in Rome on Sept. 17.

Europe imported around 10,000 metric tons on a Ni-contained unit basis from Indonesia in January-July, up from zero in the corresponding period in 2023, according to Jim Lennon, managing director at Red Door Research, with increases also seen in imports of Indonesian nickel pig iron into India, South Korea and Taiwan over the same period. China remained the largest importer of Indonesian NPI.
“The reason that [trade flow to Europe] took place was the differential between the stainless scrap price and NPI — at the end of last year and earlier this year, NPI was a lot cheaper than stainless scrap and so it was a big incentive to bring NPI into the supply chain, basically there was a shortage of scrap,” Lennon said during the same panel.

“There has been an increase in NPI being imported by European stainless mills but in the short- and long-term, there are big reasons why it will struggle and shouldn’t continue,” Parker said. “The economics of it don’t make a huge amount of sense — in the short-term we’ve had the Indonesian rupiah appreciating against the US dollar, freight costs are rising, and input prices are rising in Indonesia, with delays to mining license approvals and issues with declining ore grades.”

“Longer-term, you have CBAM [the EU’s Carbon Border Adjustment Mechanism] coming in which will favor lower-carbon products such as ferro-nickel, so it’s hard to see NPI trade flows to Europe continuing — and it has been [arriving] to replace scrap rather than ferro-nickel,” Parker added.

Platts assessed nickel pig iron with 10% nickel content at $121/mtu FOB Indonesia on Sept.19, down 50 cents on the day.
The Indonesian rupiah has rebounded around 8% against the US dollar since falling to multi-year lows in June.

Market participants at the SMR conference noted that European stainless scrap prices have fallen sharply in recent weeks, as relatively higher European prices compared to other regions attracted more import supply, prompting a downward price reaction.

Indonesian nickel ore supply
The panel also discussed the potential impact of constraints on Indonesian ore supply on the wider nickel market.

Indonesian nickel miners earlier this year had called for the government to impose a moratorium on new plants to extend the lifetime of high-grade nickel ore reserves, which can typically contain 1.5-1.8% Ni content.
Starting in 2024, Indonesia, the world’s largest nickel producer, extended the validity of companies’ mining plans, called RKAB, to three years from one year in a move that has reduced the frequency of mining quota reapplications but led to longer clearance times.

“We see a lot of effort to keep back ore by stopping the building of NPI smelters. Indonesia is very aware, and they really feel like they have enough reserves in the ground to withstand the needs and the demands of the market. I think it’s a temporary issue and I think that they will resort to discovering more and using more ore,” Christy Gellert, Marketing Analysis Specialist at Vale Canada, said.

Vale Canada, along with state-owned PT Mineral Industri Indonesia, is a large shareholder of PT Vale Indonesia, which has three operating areas in Sulawesi Island.

“The single biggest market risk in the next few years is [declining nickel] ore grades in Indonesia,” Mark Selby, CEO of junior miner Canada Nickel, said.

Indonesian nickel producers have increased imports of nickel ore from the Philippines due to local ore supply tightness. Indonesia imported 1.481 million metric tons of nickel ore from the Philippines in July, up sharply from 896,375 metric tons in June and 502,310 metric tons in May, according to BPS-Statistic Indonesia.
Source: Platts