Ready to Increase Margin, Nickel Issuers Watch Their Expenses Amid Metal Price Hikes

Nickelminingcompanieswill maintain their production cost efficiency so that they can widen their margins amid the increasing global nickel price.

Based onBloombergdata,at the close of trading Wednesday (9/16/2020) nickel prices on the London stock exchange rose 0.18 percent to the level of US $ 15,226 per ton.

Nickel prices have slowly recovered since falling at the end of March to a level of US $ 10,880 per ton.The price has risen 39.94 percent from that low.Meanwhile, during the current year 2020 prices have strengthened 8.56 percent.

Finance Director ofPT Vale Indonesia Tbk., Bernardus Irmanto, said that the company will carefully respond to the development of global nickel prices which are currently soaring.

This is because, according to him, the current increase in nickel prices is driven more by positive market sentiment expectations rather than fundamental factors, such as the declining supply of nickel on the London stock exchange.In fact, the current nickel supply on the London stock exchange is still likely to be stable, even rising.

Thus, it is not impossible that prices will decline again in the rest of this year or until next year.

“The company’s strategy remains the same, trying to optimize production by the end of the year while controlling costs,” said Bernardus to Bisnis, Thursday (17/9/2020).

The company will maintain production costs in a lower position amid the projected production volume which is higher than expected at the beginning of the year.

Thus, INCO has the potential to score even better performance in the remainder of this year if the increase in global nickel prices persists until the end of the year.

To note, the production volume of the issuer coded as the INCO effect by the end of the year rose to 73,000 tons in line with the furnace 4 renovation project which was forced to delay until next year due to the Covid-19 pandemic.

Meanwhile, the company’s production cost per unit until August 2020 is in the range of US $ 6,700 per ton, lower than the production cost per unit until June 2020 of around US $ 7,000 per ton.

In addition, this realization is also much lower than the production cost per unit of INCO throughout 2019 of US $ 7,500 per ton.

Meanwhile, SVP Corporate Secretary ofPT Aneka Tambang Tbk.Kunto Hendrapawoko said that amid the trend of rising prices, the company will also continue to further reduce its cash production costs to increase cost competitiveness so as to accelerate the company’s revenue until the end of the year.

The issuer coded as ANTM shares also admits that it will continue to strive to increase production and sales of main commodities.

“We are optimistic that the company’s nickel business performance will remain optimal in 2020, through selective evaluation by prioritizing the priority scale in the preparation of capital expenditure plans, in addition to supporting major development projects and exploration activities,” said Kunto to Bisnis, Wednesday (16/9/2020 ).

Meanwhile, this year the company targets ferronickel production and sales in the range of 27,000 tonnes, while for domestic nickel ore sales at around 1 million wmt.

As of June 2020, ANTM managed to have a cash cost of ferronickel production of US $ 3.33 per pound.

On the other hand, MNC Sekuritas Research Associate Catherina Vincentia said that the increase in metal prices, both precious and basic metals, is a sign of a revival for the mineral mining sector.

The price of gold to nickel is believed to be on track to increase until the end of the year.

However, his party still maintains a neutral position against stocks in the mineral mining sector with the main options being ANTM, MDKA, and INCO.

“We recommend buying for ANTM with a TP of Rp920 and INCO with a TP of Rp3,590 in line with the increase in gold and nickel prices which will still strengthen while year to date stock prices are still correcting,” wrote Catherina as quoted in her research publication, Thursday (17 / 9/2020).

Meanwhile, for MDKA, Catherine recommended sell trading due to potential profit taking from investors.