Nickel prices on the London Metal Exchange surged to a five-year high of US$18,850 per tonne as a result of Indonesia's decision to expedite restrictions on nickel ore exports from January 2022 to the end of 2019, Reuters reported Sept. 2.
The director general for coal and minerals at the Ministry of Energy and Mineral Resources, Bambang Gatot Ariyono, ordered exporters to stop shipments from Jan. 1, 2020, regardless of standing contracts, adding that the announcement was made to provide four months of transition time.
Goldman Sachs expects London nickel prices to reach US$20,000 per tonne in three months due to the ban, which will be applicable to all grades of nickel ore.
Indonesia accounted for about 26% of global nickel ore supply last year, according to the International Nickel Study Group.
The research arm of the China Nonferrous Metals Industry Association, Antaike, is of the opinion that the global nickel market face a deficit of over 100,000 tonnes in 2020 due to the expedited ban, as compared to a 40,000-tonne deficit without it.
Being the world's largest nickel consumer, the ban is specifically expected to disrupt China's nickel ore supply, according to the newswire. China uses the ore to produce nickel pig iron, which is further used to make stainless steel.
Antaike Chief Nickel Analyst, Xu Aidong, added that Philippine nickel ore might be able to replace or offset the shortage, but it will not be able to meet the entire Chinese demand as the grade of Philippine nickel ore is lower than that of Indonesia.
Meanwhile, Ariyono further said that Indonesian nickel reserves can only supply its existing smelting facilities, with an input capacity of 24 million tonnes, for 7.3 years.
The country has a total of 11 working smelters with 25 more in the pipeline, expecting to have 36 nickel smelters by 2022 with a total input capacity of 81 million tonnes. Four of these are mega projects, which will help Indonesia accelerate the development of its electric vehicle battery industry, Ariyono noted.
The coordinating minister overseeing mining, Luhut Pandjaitan, said investment into nickel processing plants has reached US$10 billion and expects an additional US$20 billion in the next five years.
As a result, Indonesia may be able to make up for the expected shortfall in nickel pig iron supplies caused by the export ban from next year by boosting its own capacity.
Estimates from Chinese trading firm Grand Flow Resources show that Indonesia's nickel pig iron output will jump to 530,000 tonnes in 2020, from about 261,000 tonnes a year in 2018, according to data from Australia's Macquarie Group Ltd.
Meanwhile, the ban of Indonesian bauxite and copper concentrate exports is still planned for 2022.
