Sector Update  /  Metals  /   Click here for full PDF version 
 Author(s):  Ryan Winipta    ;ReggieParengkuan 

• The ESDM Minister, Bahlil Lahadalia, indicated plans for a "measured relaxation" of RKAB quota should nickel price remain elevated.
• ESDM also plans to increase non-tax state revenue through the introduction of a new benchmark price.
• A nickel export tax is currently being proposed, while rising energy costs and sulphur shortages remain key downside risks to the sector.

Raising mid-year quota is now a base-case
Energy and Mineral Resources Minister, Bahlil Lahadalia, stated that the Ministry is planning a "measured relaxation" on RKAB quotas should nickel prices remain elevated. While no specific price threshold has been disclosed, we believe additional quotas could be granted by mid-year, particularly for HPAL projects coming online (i.e.

INCO

's Pomalaa HPAL ,

MBMA

's SLNC , among others). Nevertheless, despite the potential for a mid-FY26F quota increase,our channel checks indicated that mining ramp-up may take time, alongside approval delays. This was also reflected in FY25 production realization of only 290-300mn wmt, significantly below the approved quota of ~370mn wmt. In the near-term, we think ore premium would remain elevated, currently at around US$40/wmt for 1.6% grade saprolite.
New nickel ore benchmark price (HPM) set to be introduced
ESDM also plans to introduce a new nickel ore benchmark price (HPM), which we think would either 1) incorporate non-nickel content such as cobalt (Co), iron (Fe) into the new formula, and/or 2) raising the correction factor (CF), based on our channel-check with industry players. This would likely lead to higher HPM prices. We think the impact to saprolite ore sellers (i.e.

ANTM

/INCO) to be limited, given that ore has been trading at a premium to HPM. Meanwhile, limonite ore sellers may benefit, as the new HPM could exceed current market prices, based on our channel-check;

MBMA

stands out as a key beneficiary, with around c.10mn wmt of limonite sold to 3rdparty (i.e. Huayue Nickel Cobalt/HNC).
Nickel products export tax; negative headwind to the sector
With export tax set to be implemented (news), we conducted sensitivity analysis for every 1% increase in export tax (Fig 1&2). Among companies under our coverage,

HRUM

and

INCO

are the most exposed, followed by

MBMA

,

NCKL

, and

ANTM

. While details remain limited, based onearlier proposals (linked to energy costs and LME price), the export tax is likely to fall within the low to mid-single-digit percentage of revenue.However, further clarity on the regulation is needed to fully assess the impact.
Maintain Overweight rating with

MBMA

as top pick
We think the proposed export tax is partially priced in, as reflected in the recent knee-jerk reaction in nickel miners' share prices. We maintain sector Overweight rating, with

MBMA

as our top pick, given its plan to conduct share buyback, supported by share buyback plan and ESG-focused HPAL operations, which are relatively insulated from sulphur shortages due to self-sufficiency from the AIM project. Key downside risk is a prolonged US-Iran conflict escalation, which could drive: (1) higher energy and sulphur costs, (2) sulphur shortages, and (3) demand destruction amid worsening macro uncertainty.


Sumber : IPS