Indonesia's nickel benchmark mineral price (HMA) has fallen below the $18,000/t mark for the first period of July after three consecutive pricing periods above that level, following weakness in London Metal Exchange (LME) nickel prices.
The decline is expected to weigh on nickel ore prices and government royalty collections while providing some cost relief for downstream smelters.
The HMA for the first period of July stood at $17,593.33/t, down from $18,642.33/t in the second period of June and $18,799.29/t in the first period of June. Recent declines have been driven by easing concerns over tight ore availability. Indonesia could raise approved nickel mining output under the RKAB work plan and increase the budget to as much as 360mn t this year, market sources said. Softer seasonal demand has also dampened market sentiment and price expectations.
A lower HMA typically translates into lower transaction prices for nickel ore, potentially squeezing margins for mining companies. But smelters could benefit from reduced raw-material costs, particularly after the revised HPM pricing formula increased the minimum price of saprolite ore and almost doubled the price floor for limonite ore.
The decline in HMA also reduces royalty obligations. With the benchmark falling below $18,000/t, the royalty rate for nickel ore drops to the lowest band of 14pc, compared with 15pc during the previous three pricing periods when HMA exceeded $18,000/t. Royalty rates for ferronickel, nickel pig iron (NPI) and nickel matte also fall, to 4pc from 4.5pc, 5pc from 5.5pc, and 3.5pc from 4pc, respectively. Indonesia has delayed plans to raise royalties, which was initially planned to take effect in June.
The HMA for the second period of July is expected to remain below $18,000/t, as nickel prices have continued to weaken since mid-June and have recently hovered around the mid-$16,000/t range.
