With the issue of RKAB approval still hovering around Indonesia's nickel ore supply, Mysteel promptly conducted an on-site investigation to explore into the causes behind, which pointed to the complicated RKAB approval process, the actual supply not fully matching the approval quota, and the quota being lower than the estimated demand.
The RKAB approval process slower than expected
According to the Indonesian Nickel Miners Association (APNI), 93 out of 351 nickel mining companies in Indonesia that have applied for mining quotas have been approved at present. As of now, a total of 221 million tonnes (wet) mining quotas have been approved for 2024 and the actual annual volume is estimated to be lower than 240 million tonnes reported by the market.
However, based on Mysteel's research, the local mines' statistics show that the approved 2024 mining quotas are between 190-200 million tonnes (wet). With 2024 already halfway through, the current RKAB approval is slower than expected. This is mainly due to the stricter scrutiny and more cautious approach taken by Indonesian authorities following the mining-related anti-corruption investigation in September 2023.
Additionally, the new approval policy has changed to a three-year renewal rather than one year in the past, which has tripled the workload for data review and verification, predictably slowing down the approval process. It is understood that the RKAB approval is still proceeding steadily, and the subsequent progress is worth attention.
Actual supply of nickel ore could not match the approved volume
Although 221 million tonnes of nickel ore mining quotas have been approved as of now, the actual supply is more than likely to be below the volume for several reasons:
1. Mining Capacity: Due to limitations in funds, equipment, personnel, and other factors, the mining quotas may not be fully utilized.
2. Transportation Capacity: Due to restrictions on vehicles, port throughput, and other factors, the actual supply capacity may be less than the allocated quotas.
3. Weather Conditions: Indonesia's rainy season typically occurs in the second and third quarters. The rainy season, however, began earlier this year, during which period many mining operations have paused. Even nickel ore that has been mined faces difficulties in being shipped out smoothly.
4. Other Factors: Other unforeseen events or force majeure will also impact the supply.
Considering the factors mentioned above, Mysteel estimates that around 80-85% of the mining quotas will be translated into actual supply. This means that out of the approved 221 million tonnes mining quotas, only 170-180 million tonnes are likely to be mined and supplied downstream.
On the other hand, Indonesia's imports of nickel ore from the Philippines have also increased month by month. Starting in March, nickel ore from the Philippines began to be transported to Indonesia, with 11 ships arriving in May, increasing from 5-6 ships each in March and April.
As of June 12, 12 ships have arrived in Indonesia carrying nickel ore from the Philippines. It is estimated that 25-30 ships will reach Indonesia throughout the month of June, with a volume of around 1.3-1.5 million tonnes (wet), according to Mysteel's assessment. This also reflects that the current shortage of nickel ore in Indonesia persists.
Indonesia's annual nickel demand of 244 million tonnes (wet) is higher than the RKAB approval
According to Mysteel's assessment, Indonesia's nickel production in 2023 was 1.8784 million tonnes in nickel content, consuming a total of 200 million tonnes (wet) of nickel ore. In 2024, Indonesia's nickel production is estimated to reach 2.2353 million tonnes in nickel content, with nickel ore demand at 244 million tonnes (wet).
Conclusion
In summary, the tight supply of nickel ore in Indonesia still exists. Although a total of 221 million tonnes (wet) mining quotas have been approved, the actual supply is expected to be only 170-180 million tonnes (wet). This is significantly lower than the estimated annual demand of 244 million tonnes (wet) in the Indonesian market for the whole year. Coupled with the ongoing rainy season in Indonesia, the nickel ore supply is increasingly tight in the near term, making nickel ore prices more likely to rise than fall.
On the demand side, Mysteel's investigation reveals that nickel ore stocks in major production areas are running low. Large production companies have about a month's worth of inventory left, while smaller factories have even less, aggravating the supply tightness.
Written by Cora Ji, jiruyan@mysteel.com
Edited by Aggie Hu, huchenying@mysteel.com