NAC sees temporary increase in global nickel prices

By Sheldeen Joy Talavera, Reporter

LISTED mining company Nickel Asia Corp. (NAC) said it expects global nickel prices to temporarily increase in the short term due to the presidential election in Indonesia, the world’s largest nickel producer.

“Right now, due to oversupply, there is some pressure on overall nickel prices. However, because of the presidential elections in Indonesia, there has been a slowdown in the awarding of their mining quota permits. So, in the very near term, there is some price upside for nickel,” said Andre Mikael Lu Dy, NAC’s vice-president for treasury and investor relations and sales, in a recent briefing.

“In the very near term, there is some upside potential for nickel prices,” he added.

Mr. Dy said, however, that he expects global nickel prices to eventually “normalize” after the leadership changes conclude.

“As the government gets settled into the roles and mining quotas are released, prices will normalize because the physical production of nickel and nickel pig iron in Indonesia is still a lot,” he said.

Indonesia produced an estimated 40.2% of the world’s nickel last year, according to S&P Global Market Intelligence data.

As demand continues to grow at a pace of 3-5% in the stainless-steel market, Mr. Dy said that “some tightness in the supply” could be experienced by 2028.

For production, he expects it to remain at the same level with “not a lot of growth” but can “still be growing by low single digits.”

NAC saw a decline of 53% in its attributable net income to P7.9 billion for 2023, driven by lower nickel prices. Revenues from the sale of ore declined by 16% to P21.4 billion.

During the period, the weighted nickel ore sales price dropped by 20% to $23.30 per wet metric ton (WMT). The company’s five operating mines sold a combined 16.5 million WMT, up 3%.

Analysts said that the anticipated temporary increase in global nickel prices offers short-term income opportunities.

“In the short term, the anticipated increase in nickel prices due to the Indonesian presidential election could positively affect NAC’s income for 2024,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

“The eventual normalization of prices as production resumes may mitigate this impact,” he added.

For his part,  Luis A. Limlingan, head of sales at Regina Capital Development Corp., said: “To achieve higher net income, NIKL could focus on cost reduction, diversification, market expansion, strategic partnerships, technology adoption, and hedging against price volatility.”

Mr. Arce said that attaining higher income can be realized through diversifying its product portfolio to reduce dependence on nickel prices.

He added that the company may implement strategies such as “enhancing operational efficiency to reduce production costs” and “expanding into markets with higher demand for nickel or value-added nickel products.”

Mr. Dy did not specify the exact amount of capital expenditure (capex) allocated for 2024, but he said that it is “half or less than half” of last year’s. The company set a capex of P4.5 billion in 2023.

“The capex for Nickel Asia this year is much less than what we spent for last year. Last year was an outlier because we had to do a lot of equipment replacement,” he said.

NAC is currently developing three mine projects, namely Dinapigue, Bulanjao, and Manicani, that are scheduled to either ramp up or kick off this year — a development it said could drive its sales volume growth in the coming years.

Shares in the company went down by P0.18 or 4.17% to close at P4.14 each.