Indonesian export ban threat breathes new life into nickel price

Indonesia's proposed ban on export shipments of unprocessed metals is set to come into effect on January 1 and mining companies operating in the country are forecasting disaster if the government implements it in full.

Indonesia, with a population of 240 million, is the world’s premier thermal coal exporter, a nickel, bauxite and tin powerhouse and is also rich in gold and copper.

FT.com quotes Garibaldi Thohir, a vice-chairman of Indonesia' chamber of commerce (Kadin) and chief executive of Adaro, the country’s number two producer of thermal coal for power stations as saying: "If the government implements a full ban, the whole industry will collapse:"

"With just over two months to go before the ban comes in, the government and many mining companies are engaged in a game of brinkmanship. Most investors are betting that the government will not risk losing billions of dollars in tax revenues and royalties by halting exports."

It is particularly the beaten down nickel market that could feel the impact should Indonesia go ahead with the restrictions, boosting producers in the rest of world.

The price of the steelmaking raw material has already picked up nearly 5% on the London Metal Exchange this month after hitting 4-year lows early in October.

Nickel for delivery in three months jumped to $14,340 this week as Chinese importers stockpile the metal in anticipation of supply disruptions.

"It's [Chinese imports] such an important swing factor for the market that you could see a decent rally in the nickel market if a ban is strictly enforced – at least 20 or 30 percent," said Daniel Smith, head of metals research at Standard Chartered told Reuters last week.