Nickel price spikes as risks to supply grow in top producer Indonesia

Nickel prices spiked following a report of further output cuts in Indonesia, and as the top producer of the metal took steps to control its commodities exports.

Futures rallied sharply on the London Metal Exchange during Asian trading hours after Shanghai Metals Market reported that 10% to 15% of high-grade nickel pig iron capacity at Indonesia Weda Bay Industrial Park will be placed under rotational maintenance in the coming months.

Nickel got a further lift as Bloomberg reported that Indonesia plans to tighten control over commodity exports including coal and palm oil, with prices rallying as much as 3.2% to $19,165 a ton before paring some gains. Speculation that the government will centralize commodities exports to control capital flows and shore up a plunging currency has rattled the country’s natural resources markets.

Some Indonesian production of NPI — used to make stainless steel — has been curtailed since March and April due to a drop in ore supplies and high costs, SMM said, without citing anyone. The reallocation of power resources to new aluminum capacity has worsened the situation, the research firm said.

Indonesia has cut nickel ore mining quotas this year to help revive prices, causing a raw material shortage and forcing production cuts at local smelters. The country accounts for well over half of global output, thanks to a wave of Chinese investment.

NPI smelters at the Weda Bay park produce about 40,000 tons a month of contained metal, according to Guotai Junan Futures Co. China’s Tsingshan Holding Group Co. is major operator there.

Nickel was trading at $19,015 a ton as of 12:30 p.m. local time on the LME, in a mixed session for industrial metals. Aluminum rose 1.3% while copper fell 0.8%.

Read More: Tsingshan asks some Indonesian nickel producers to cut output to free power for aluminum