Indonesia nickel production-cut talk weighs on sulfur demand outlook

Discussions over potential nickel production cuts in Indonesia have weighed on sentiment in the sulfur market, with participants increasingly concerned over the implications for sulfur demand from the country's nickel-processing sector.

While the nickel futures prices rebounded following the production-cut talk, market participants said the reaction was largely sentiment-driven, with little corresponding improvement in physical NPI and MHP markets.

The discussions have therefore had an asymmetric impact across the markets, weighing on sulfur prices on expectations of lower future consumption while providing little support to physical nickel prices.

No fresh NPI or MHP spot trades were heard following the production-cut talk, with participants largely adopting a wait-and-see approach. High inventories and subdued buying interest continued to weigh on NPI, while MHP payables remained under pressure from weak downstream battery demand and softer broader nickel and cobalt prices.

One Indonesian nickel smelter said it had already reduced operating rates to around 25% and remained well covered on sulfur supply. "We have already cut our operating rates to 25%, and our sulfur inventory from previous procurements can last another one to two months. There is no need to rush in procurement as sulfur costs are still quite high," the nickel smelter said.

Market participants said the comments highlighted growing concerns over sulfur demand from Indonesia's nickel-processing sector, particularly if production cuts are implemented across a broader number of smelters. Several traders said buyers remained cautious amid uncertainty over future operating rates and sulfur consumption requirements.

Platts, part of S&P Global Energy, assessed 10% Ni Indonesian NPI at $139.70/mtu FOB Indonesia, unchanged day over day but down $1.20/mtu week over week.

Platts also assessed MHP CIF North Asia nickel payables at 83% basis LME nickel Oct. 23, down 0.5 percentage points day over day and down 1.5 percentage points week over week, reflecting continued weakness in the battery materials supply chain.

Platts assessed CFR Indonesia granular sulfur at $850/mt Oct. 22, down $30/mt week over week.