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Worries over accelerated Indonesian ore export ban drive nickel price surge


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Worries over accelerated Indonesian ore export ban drive nickel price surge

The commodity deck during the week ended Aug. 9 was mixed, with nickel prices extending their rally, even crossing a four-year trading high once, as the market worried that major supplier Indonesia would enforce a ban on unprocessed ore exports earlier than the previously communicated 2022 deadline.

Indonesia is gathering input from the Ministry of Energy and Mineral Resources about the impact of banning shipments earlier than 2022, Bloomberg News reported, citing the Southeast Asian country's trade minister, Enggartiasto Lukita. But Lukita said no decision has been made, and any such plan will need "thoughtful consideration."

Elsewhere, China sent over its newest threat in retaliation against President Donald Trump's 10% tariffs on US$300 billion of Chinese goods announced the week before. China said Aug. 5 that it could put tariffs on U.S. agricultural products, state-run Xinhua News Agency reported. "The Customs Tariff Commission of the State Council has not ruled out import tariffs on newly purchased U.S. agricultural products after August 3, and Chinese related companies have suspended purchasing U.S. agricultural products."

In the meantime, China has allowed the yuan to fall below 7 against the U.S. dollar for the first time since 2008. Treasury Secretary Steven Mnuchin plans to engage with the International Monetary Fund to address China's actions, his department said.

Price ring

Three-month nickel on the London Metal Exchange recorded its biggest daily gain since 2009 on Aug. 8, once surging more than 12.7% to US$16,690 per tonne. It closed the week at US$15,610/t, compared with US$14,515/t a week ago. Shanghai Futures Exchange contracts, the most traded nickel contract, surged by the daily limit, reaching the highest since trading began in 2015.

Copper prices recovered from some of the losses seen in the prior two weeks, closing at US$5,743/t on Aug. 9, after having started at US$5,646/t, and ending the previous week at US$5,767/t. Zinc dropped to US$2,262/t from US$2,351/t. Lead climbed to US$2,085/t from US$1,949.50/t.

Precious metals were on the rise, with gold surpassing US$1,500 per ounce during the week as investors continued building up positions in the yellow metal amid macroeconomic uncertainty. Gold closed Aug. 9 at US$1,497.90/oz from US$1,445.40/oz the previous week. Silver rose to US$16.98/oz from US$16.26/oz.

Aluminum dipped to US$1,745.50/t, from US$1,748.50/t in the week-ago period.

Talking points

Following the nickel rally, BMO Capital Markets said in an Aug. 8 note that if Indonesia accelerates a ban on ore exports, the nickel market deficit for the next two years would significantly increase. On the other hand, if the ban is not implemented ahead of schedule, "nickel could easily have a fast 20% downside."

"The Chinese market is now pricing in resource protectionism by Indonesia in order to drive downstream investment," BMO wrote.

Rather than cut off ore exports entirely, BMO said a much more rational course for Indonesia would be to perform an audit of refined nickel facilities under construction and revoke export licenses for companies not making fast enough progress. "Under this scenario, a nickel constraint would be avoided, legislation would remain unchanged and Indonesia would show its commitment to getting investment for downstream development," analysts wrote.

Amid intensifying U.S.-China trade disputes, analysts at ANZ see industrial metals remaining under pressure as risks of a full-blown trade war could weigh on global economic growth. "Any subsequent contraction in industrial activity will impact metals demand," ANZ analysts wrote Aug. 9.

Regarding precious metals, ANZ said falling U.S. Treasury yields, inverted yield curves, rising fears of economic recessions along with easing interest rates have created the "perfect backdrop" to sustain higher gold prices.

In an Aug. 8 note, ANZ analysts wrote that the recovery seen in China's commodity imports during July contrary to worries of weaker demand suggests that underlying demand remains robust despite the U.S.-China trade conflict.


New Gold Inc. entered into a bought-deal financing agreement with a syndicate of underwriters for shares at C$1.60 apiece for gross proceeds of C$150 million.

Yamana Gold Inc. accepted about US$415.0 million in principal amount of notes under a buyback offer launched in July to reduce outstanding debt.

Australian mining magnate Clive Palmer settled about A$100 million in claims from special-purpose liquidators over the collapse of Queensland Nickel Pty. Ltd. in 2016.

SunCoke Energy Inc. amended its revolving credit agreement, increasing the total borrowing capacity to US$400 million and extending the maturity date to Aug. 5, 2024.

Sirius Minerals PLC decided to suspend its proposed offer of US$500 million senior secured notes due 2027 due to current market conditions.

Africa Finance Corp. and African Export Import Bank secured formal credit approval for the previously announced US$200 million senior debt facility for Colluli Mining Share Co. to fund the development and construction of the Colluli potash project in Eritrea.

Salt Lake Potash Ltd. secured US$180 million in debt financing to advance its Lake Way potash project in Western Australia.

Venturex Resources Ltd. secured a US$70 million senior debt facility from global commodities Trafigura Pte. Ltd. to develop the former's wholly owned flagship Sulphur Springs copper-zinc project in Western Australia.