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METAL MINING SECTOR: KEEP CALM AND BUY BLACK BEAUTY

Nickel: the best performer in base metal commodities
Nickel market has been faced with a consistent supply deficit over the preceding year (Augst’19 Nickel LME deficit -56,000 tonnes). We see, Philippines and Indonesia remain the key to supply constraint. Demand for automotive EV battery will surely to increase sooner rather than later. Nickel is becoming a strategic metal for the battery supply chain, while the market currently accounts for 750kt in 2018 (vs 111kt in 2013). Meanwhile, with the introduction of electric vehicle in Indonesia, we forecast EV batteries demand on nickel to rise to 95kt in 2020 and 240kt in 2025 (from only 44kt in 2018). This will become the key catalyst for the sector and believe this is just the beginning of an exciting story of nickel and booming future.

Tin: supply remain constrained in 2020
Just like the other base metals, tin price has been overshadowed by concerns from supply tightness. The global tin supply will remain tight as the lower ore production from Indonesia and Myanmar. Indonesia has banned any trading of tin ingots from illegal mines since last year. The impact is clearly seen on the fall of tin shipments in 2018 (-3% YoY to 75,678 tons). With the new law enforcement and stricter regulations, we expect tin mining activities to remain strictly monitored, thus, the tin shipment may fall to 72,000 in 2019 (-7% YoY) and 70,000 in 2020 ( -3% YoY). From Myanmar, supply tightness is likely to show material impact in 2020. We estimate Myanmar’s ore stockpile to be depleted by the end of 2019 as the country shifts from open-pit to underground mining.

Overweight Rating
We remain confident with our overweight call on the sector metal mining. Maintain BUY and TPs for INCO Rp 4,500/share (20.3% upside), ANTM Rp 1,300 /share (22.1% upside), and TINS Rp 1,775/share (58.5% upside).

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