Metal Mining

NPI price could weaken on RKAB release, Tin Price Potential Rebound on Supply Tightness

• While Tin prices have softened, China still struggles to source tin ore, which has decreased refined tin production by 31% mom.
• We expect Ni ore premium to ease after WBN’s RKAB quota release, while NPI price surged due to china’s temporary ss restocking.
• We reiterate our Overweight rating on the sector, with TINS and NCKL as our top picks due to their stronger earnings visibility.

Tin prices cooled down, but we see a potential for a rebound

Refined tin inventory in China declined by 6% mom as China struggles to secure tin ore from Myanmar. As a result, tin ore imports have continued to decline by -6% mom, while refined tin production dropped by 31% mom. On the other hand, Indonesia’s tin exports have improved, with national exports in 3Q24 amounting to 14.9kt, +40% qoq, dominated by private smelter’s sales contribution. However, the MEMR has recently announced the revocation of 15 mining licenses that were connected to the corruption case in TINS, which could tighten supply should they have export quotas.  Nonetheless, we expect an outperformance in TINS’ upcoming 3Q24 earnings as LME tin price was consistently above US$30k/ton and cash cost has been improving post its Ausmelt reactivation.

NPI price at a record high, ore premium should ease

Influx of Stainless Steel demand post China’s golden week holiday has prompted restocking activities from stainless steel mills, which drove NPI price to its highest YTD at US$12,800/ton. On the other hand, stainless steel (SS) exports stood at 524kt in September, -6% mom, yet are still considered high as the market was expecting an anti-dumping measure to be implemented for Chinese SS. Meanwhile, ESDM approved WBN’s latest ore quota at 32mn wmt, which was lower than its FY23 sales volume of 36mn wmt but should be enough to alleviate the ore premium situation, starting at the beginning of 2025. 

Maintain Overweight on the sector with unchanged top picks of TINS/NCKL

We believe there are opportunities for NPI producers to capitalize on the stronger NPI price throughout October to produce strong cash margins of up to c.US$4k/ton for NCKL and c.US$2k/ton for MBMA/ANTM. Furthermore, ANTM should be able to capitalize on the existing ore premium sales to third parties as there is a time lag between WBN’s RKAB quota approval and delivery of its actual sales. Nonetheless, ANTM should benefit from both situations as it owns 10% of WBN. Thus, we maintain our overweight rating in the sector, with pecking order as follows: TINS> NCKL> ANTM> MDKA> MBMA> INCO.

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