UBS Indonesian Metals Sector Nickel: Finding a new floor post higher ore benchmark
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Indonesia's Ministry of Energy and Mineral Resources has revised the nickel ore price benchmark (HPM) through Ministerial Regulation 144/2026, effective April 15, 2026. The modification factor for 1.6 percent grade ore was increased from 17 percent to 30 percent, substantially raising input costs for most HPAL operations and certain RKEF facilities. UBS estimates this new HPM will increase HPAL cash costs by $2,500 to $3,000 per ton, exceeding current profitability margins and pushing many HPAL operations into net losses. For RKEF, cash costs could rise by $2,000 to $3,000 per ton. However, large-scale RKEF supply cuts appear unlikely since most operations already procure ore above the new HPM at market rates.
The tighter margins downstream weaken miners' pricing power, raising the risk of supply responses. Combined with sulfur supply tightness in Indonesia, this pressure on HPAL operations could establish a higher price floor for MHP and LME nickel. UBS notes that the new benchmark could be revised again within the next one to three months to mitigate severe supply cuts.
Producers with net long limonite positions stand to benefit significantly. UBS expects the new HPM to boost 2026 EPS by 37 percent for INCO, 32 percent for MBMA, and 31 percent for NCKL. The firm reiterates its preferred nickel stock rankings: INCO, ANTM, MBMA, and NCKL, all rated Buy.