High Nickel Prices Good News for Mining Companies

Big publicly listed nickel miners and an equipment supplier saw their fundamentals improve this year, making up for losses from the previous year, amid surging global nickel prices.

PT Vale Indonesia, the top nickel matte producer in Indonesia, saw its net profit rise 10.6 percent year-on-year (yoy) to US$58.7 million in the first half of this year, according to its latest financial report.

The company, listed at the Indonesia Stock Exchange (IDX) as INCO, booked $414.9 million in revenue in the first half of this year, up 15 percent yoy from $360.4 million, even though its nickel matte production dropped 17 percent yoy to 30,246 ton because of repairs on its smelter facility. The company expects to produce about 64,000 tons of nickel matte this year, down from 72,237 tons in 2020.

“We hope that the production increase, cost control and projected high nickel price will [help maximize the company’s] revenue and profit,” Vale chief financial officer Bernardus Irmanto said at a public exposé on Wednesday. Nickel prices have been rising this year because of a combination of high demand as reopening economies seek the metal, which is mainly used to produce stainless steel, and of limited supply as nickel miners, especially those in Indonesia, have yet to return to full operational capacity.

Due to rising global prices, Indonesia’s nickel benchmark price (HMA) hit $19,239 per dry metric ton (dmt) in September, the highest level since October 2017, when the Energy and Mineral Resources Ministry launched the HMA. Read also: Vale Indonesia’s nickel matte output down 20 percent in Q2 Bernardus expects nickel prices to hover between $17,000 and $18,000 per ton until year-end. He also said the company had absorbed 54.6 percent of its annual $130 million capital expenditure (capex) as of the first half to prepare for a nickel furnace rebuild slated to start in November.

PT Aneka Tambang (Antam), a major state-owned diversified miner, saw its net profit reach Rp 630 billion in the first quarter, reversing a Rp 281 billion loss from the same period last year, also due to high prices. The company has not released its first-half financial report. Listed on the IDX as ANTM, the company’s revenue rose 77 percent yoy to Rp 9.21 trillion in the first quarter, even as its ferronickel production declined 0.23 percent yoy to 6,300 tons. Antam aims to sell 25,000 tons of ferronickel by year-end. “This is an opportunity, as Antam has quite a lot of nickel reserves,” Antam finance and risk management director Anton Herdianto said on Thursday.

Meanwhile, heavy equipment firm PT United Tractors, a subsidiary of automotive giant PT Astra International, saw its profit rise 11.19 percent yoy to Rp 4.51 trillion in the first half as revenue rose 12.4 percent yoy to Rp 37.31 trillion, led by rising equipment demand from coal miners and nickel miners. United Tractors director Iman Nurwahyu noted that nickel miners contributed 25 to 30 percent of heavy equipment sold in the first half of this year, higher than the 20 percent contribution over the same period last year. “Nickel is our new sector this year. Heavy equipment demand allocation for nickel is one and a half to two times bigger [this year] compared to last year,” he said in a virtual public expose on Wednesday.

Listed on the IDX as UNTR, United Tractors saw its mining equipment sales rise 117 percent yoy to 735 units in the first half of this year. However, the company also saw a delay in heavy equipment delivery to customers due to the pandemic. It remained optimistic conditions would normalize in the second half. ANTM’ stocks gained 6.15 percent, while INCO’s and UNTR’s shares, respectively, lost 6.36 percent and ​​20.36 percent as of Friday, according to IDX data.

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