Indonesia decision bears down on Nickel market
16 January 2017
On 12th January the Indonesia government announced it would ease its ban imposed on nickel ore exports in 2014. The potential increased supply to the global market immediately put downward pressure on nickel prices, which fell below US$10,000/tonne on the LME before recovering slightly.
On Saturday 14th January the Indonesian Energy and Resource Ministry sought to calm concerns that easing the 2014 ban would flood the global nickel market.
It claimed the decision was aimed at balancing smelting capacity and creating mining jobs. The mining minster said Indonesia may export around 5 million
tonnes of nickel ore annually, a small proportion of its pre-ban ore export volumes.
The Indonesian government announced it would allow nickel miners that dedicate at least 30% of their smelting capacity to process low grade ore (less than
1.7% nickel) to export remaining ore production. This eases the 2014 ban on exports, which triggered large-scale investment in domestic smelting of
the Indonesia’s ore reserves. State-owned PT Aneka Tamang is reported to have a stockpile of as much as 20 million tonnes of low-grade nickel ore.
If processed this would represent 250,000 tonnes of refined nickel.
The Indonesia government reassurances reinforced analysts expectations that flow into the world market would take time to increase, particularly if prices
remain subdued. However, 2017 expectations had been for a tight global market with a potential nickel supply deficit of 80kt. The Indonesian news has
inevitably turned the market from moderately bullish to distinctly bearlike, with analysts saying the potential availability of significant volumes
of ore has removed concerned over short-term tightness in the nickel market.
The abrupt decision has triggered protests from Chinese investors in Indonesia smelting capacity, with one, at least, threatening to sue for compensation.
According to Reuters, Chinese companies have invested a total of around US$15 billion (€14 billion) to develop Indonesian smelting operations that
are now in operation.
