Nickel’s fate lies in Indonesia as top supplier weighs early ban

Nickel smelter. (Photo by Marcelo Coelho – Vale)

Indonesia is weighing whether to advance the timeline for a planned ban on exports of mineral ores, the country’s trade minister said a day after nickel prices surged on speculation the Southeast Asian nation will halt shipments.

President Joko Widodo is gathering input from the Ministry of Energy and Mineral Resources about the impact of banning shipments earlier than 2022, Trade Minister Enggartiasto Lukita told reporters in Jakarta on Friday. No decision has been made and any such plan will require “thoughtful consideration” as it will hurt the country’s exports, he said.

Nickel posted its biggest intraday rally in more than a decade on Thursday, exploding past $16,000 a tonne

Nickel posted its biggest intraday rally in more than a decade on Thursday, exploding past $16,000 a ton, as speculation swirled that Indonesia may soon ban ore exports. The minister’s comments were the first time an Indonesian official has confirmed that authorities are considering options for an early ban. The restrictions risk deepening a looming shortage of the metal used in stainless steel and batteries as the country is the top source of mined nickel.

“The impact of such a ban — if implemented immediately — would be stark, as Indonesia supplies about 8% of the market’s nickel units via nickel ore exports,” Citigroup Inc. analysts including Oliver Nugent said in an emailed note dated Thursday. Nickel will rally to $17,000 or $18,000 a ton if a ban is brought forward to before mid-2020, they said.

Nickel in London, which briefly surged almost $2,000 a ton on Thursday, closed the next day at $15,550, down 2.1%. That pared this week’s rally to 7.6%. While the metal traded on the Shanghai Futures Exchange, gave up some of its gains, it still managed to post the highest close since it started trading in 2015.

In other metals traded on the LME, copper, aluminum, zinc and lead fell while tin rose.

“To be clear, we are not of the view this is a sustainable move, however it does make sense to consider the rationale behind it,” Colin Hamilton, managing director for commodities research at BMO Capital Markets Ltd, said by phone. “If this occurs, the nickel market deficit for the next two years would increase markedly. If it does not, nickel could easily have a fast 20% downside.”

Export quotas

While the government issues export quotas to miners with firm commitments to build smelters, it has said it will revoke the permits of companies failing to meet construction targets set out by the ministry. Lukita said an early ban may accelerate construction of downstream industry, including smelters.

This is not the first time that Indonesia has flip-flopped on its mineral exports policy

In the meantime, the Indonesian Nickel Miners Association has called for consistency in the nation’s exports policy as a lot of investment has gone into developing mines. “We want the government to be consistent and not change the policy,” said Meidy Katrin Lengkey, the association’s secretary general. “Don’t run half the distance and then change the policy.”

This is not the first time that Indonesia has flip-flopped on its mineral exports policy. The government imposed a blanket ban on shipments of mineral ores in 2014 only to relax it in 2017, allowing overseas sale of surplus ore containing less than 1.7% nickel.

The producers association, consisting of 281 miners, has sought a meeting with Jokowi, as the president is commonly known, to push for the opening up of exports of low-grade ore to all miners and introduction of a monthly benchmark rate to shore up domestic prices.

(By Eko Listiyorini, Martin Ritchie and Winnie Zhu)


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