Metal Mining

Aug24 Metal Sector Update: supports for tin price; nickel ore tightness persists 

 

  • Tin price strengthened to US$32k/t in Aug24, as inventory (SHFE and LME) and Indonesian exports fell -23% mom.
  • Nickel ore supply remained tight, which boosted the NPI price in Aug24. However, the LME price fell on weaker fundamentals.
  • We reiterate our Overweight rating on the sector, with TINS and NCKL as our top picks due to stronger earnings visibility.

 

Tin: Indonesia’s Jul24 export weakened

Indonesia’s Jul24 refined tin export volume dropped to 3.4kt, -23.5% mom; -51.5% yoy, after consecutive growth since Apr24, where we noticed an increase of exports to China of 1.1kt, +123% mom, which could indicate a stronger export activity by private smelters. On the other hand, we noted a decline in exports to other countries (India -19%, Korea -51%, and Singapore -52%), which may suggest that TINS’ sales have weakened in Jul24. Nonetheless, we are not overly concerned about monthly sales figures, as there is usually a lag from production to sales realization and management had mentioned the implementation of SIMBARA in July, which should see some sales carryover to Aug24. Moving forward, we expect tin prices to remain robust due to declining inventory and limited supply.

 

More cost cutting on the horizon

TINS’ TSL Ausmelt is back in operation after a year-long maintenance, which, in our view, could reduce TINS’ total cash cost by c.10%-15%. However, as it only started operation in Aug24, we estimate the cash cost efficiency to only materialize in 4Q24. Thus, despite the lower commodity price, we could see margins remaining flat due to stronger cash cost management.

 

Nickel ore supply tightness persists; NPI price soared

Nickel ore supply tightness has persisted as imports from the Philippines grew to 896k wmt in Jun24, with an additional +20% growth reported in Jul24 (source: SMM). Furthermore, Indonesian NPI output in Jul24 fell by -6.5% mom to 104.9kt, which we believe was the driver behind the recent strengthening in the NPI price of c.+7% throughout July-Aug24. Nonetheless, we remain cautious about prices in the coming months as we enter a seasonally weak restocking period. Thus, we expect prices to remain rangebound at US$12-12.5k/ton.

 

Maintain Overweight on the sector with an unchanged top pick of TINS

We continue to expect a quieter market in 2H24 as we enter the off-season. Thus, we expect the benchmark price to be rangebound with lower volatility. We maintain our Overweight rating on the sector, with pecking orders as follows: TINS> NCKL> MBMA> MDKA> ANTM>INCO.

 

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