Metal Mining: FY25F Outlook: Growth from a low base; lowering sector’s rating to Neutral on flattish price outlook (NEUTRAL)

Stock Code	Last Price	Change	Change %
PTRO	27,600	1,100	4.15%
CUAN	10,300	850	8.99%
MLPT	18,000	525	3.00%
BREN	9,200	375	4.25%
LIFE	7,200	325	4.73%
PANI	15,975	275	1.75%
AMMN	9,200	250	2.79%
GGRM	13,125	225	1.74%

Metal Mining

FY25F Outlook: Growth from a low base; lowering sector’s rating to Neutral on flattish price outlook

Our order of preference on nickel still stands with Ore> NPI> LME, where we expect ore premium to fall but remain tight.
With limited addition of RKEF capacity and closures of plants ex-Indonesia, we expect the oversupply of class-2 products to subside.
We downgraded our sector rating to Neutral from OW, with a pecking order of: TINS> NCKL> ANTM> MBMA> MDKA> INCO.

Tight ore supply might persist, and market is prone to disruptions

Indonesian nickel ore supply should improve in FY25 as production quotas reset, thus reducing premiums previously driven by RKAB approval delays. However, we believe risks remain due to a declining approved ore quota and non-producing applications, which could create supply gaps. Despite this, we estimate ore premiums should stabilize below US$10/wmt in FY25, with saprolite ore prices expected to remain in the US$28-32/wmt range. Overall, we project ore production from our companies under coverage to grow by +28% YoY in FY25, supporting margin expansion for miners.

NPI: buoyed by SS demand, expect a flattish year

According to WoodMac, global stainless production is set to grow by +5.5-6.0% in FY25-26 to 66.2Mt/69.9Mt, which is projected to increase primary nickel consumption for SS by +7.6% to 2.3Mt/2.5Mt. China, Indonesia, and Russia will remain the backbone for growth in the stainless-steel sector through capacity additions. With limited RKEF capacity addition, followed by closures of ex-Indonesia smelters, we should expect a reduction in the oversupply of class-2 products. Therefore, we reiterate our previous NPI price assumption of US$12,000/ton in FY25.

LME: pressured by inventory glut, excessive supply, weakening demand

LME and SHFE nickel inventories have increased by +134% YTD, reflecting tepid demand from end users, as Chinese sulphate producers are refining excess products into nickel metal to be delivered on the exchange. WoodMac estimates that class-1 supply is set to grow by +26% from FY23 levels, which we believe is exacerbated by Indonesian intermediary products. On the demand side, based on estimates by EIU, EV sales growth is expected to slow down globally by +16% yoy in FY25 compared to a CAGR of +53% in the past 5 years. Looking at the current supply glut, we expect a worsening oversupply for class-1 products and believe that LME nickel prices will remain pressured at US$16,500/ton.

Downgrading the sector to Neutral

We have downgraded the sector’s rating to Neutral, as we expect nickel and tin prices to remain flat in FY25 due to rising supply outpacing soft demand, particularly in China. Despite this, we expect companies under our coverage to deliver positive earnings growth in FY25, as FY24 has established a low base for earnings due to delayed RKAB approvals. We forecast strong revenue and net profit growth of 6.7% and 54.8% yoy in FY25. Our pecking order is TINS >NCKL >ANTM >MBMA >MDKA >INCO.

… Read More 20241203 Metal Outlook 2025