Metal Mining

Ore Premium Reversal in Jul25; 2H25 Outlook Hinges on Supply, Restocking and RKAB Approvals

• Nickel ore price has risen +19% YTD, while NPI declined -2%, pressuring non-integrated mines from inventory stocking at thin margins.
• Despite recent reversal of nickel ore premium trend, 2H25 outlook hinges on supply addition, restocking season and RKAB approval.
• We reiterate our Neutral rating on the sector and continue to favor ore over MHP and NPI; INCO and MBMA are our current top picks.

Ore premium has finally reversed on weak demand

After a strong uptrend throughout 2024, the nickel ore premium continued to rise in 2025, peaking at US$26.8/wmt in June before declining in Jul25 amid a cooldown in the benchmark HPM price, which followed the weakening LME price. YTD, ore prices have risen by +19% despite NPI price declining by -2%. This divergence has caused margin pressure on non-integrated smelters and further disincentivize it from restocking amid thin to negative margins.

Upside vs. downside risk potentials

We believe that the ore premium may have reached its peak, where a reversal in price is inevitable, at least in the short term due to: 1) the continuous decline of the NPI price that almost returned to its bottom in Jan25 of US$11k/ton, on the back of a sluggish SS restocking demand, 2) the anticipation of additional RKAB release in Jul-Aug25 to potentially add supply in 2H25, supported by better weather conditions and quota upgrades. Nonetheless, we also see potential upside risk on the premium from: 1) the traditional peak restocking season in China between Sept-Oct25, known as the golden September, silver October, and 2) MEMR’s consideration to revert RKAB issuance from 3 years to an annual basis, which could add the overhang toward future domestic supply in an already tight market.

Maintain Neutral on the sector with top picks of MBMA and INCO

At this juncture, we continue to favor Ore> MHP> NPI> Matte as ore profitability is still attractive despite declining trends. Meanwhile, we prefer MHP over NPI given stronger cash margin per tonne, and rank Matte at the bottom of our preference due to its pricing against a currently weak LME nickel price. Our pecking order is: MBMA> INCO> BRMS> NCKL> ANTM> MDKA> TINS based on the prospect of incoming catalysts. We prefer MBMA due to backloaded performance after smelter maintenance in 1H25, and the start of AIM project in 2H25, and INCO due to the possibility of a payability upgrade and stronger ore sales of c.2mn wmt, subject to RKAB approval.

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