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Western Areas sees Indonesian nickel ore export ban boosting 2014 nickel prices

Highlights

Nickel prices are likely to be pushed higher in 2014 if Indonesia introduces an export ban on laterite nickel ore, which would tighten supply particularly for China, according to Dan Loughner, the head of Australian nickel producer Western Areas.

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"The latest technology of Chinese nickel pig iron, being rotary kiln electric arc furnace (RKEAF), relies solely on Indonesian laterite due to its high grade nickel and low iron content," he said in a Tuesday interview posted on the Western Areas website and distributed by public relations firm FTI.

"Any ban, tax or choking of laterite supply from Indonesia should have a positive influence on the nickel price," he added.

China requires around 850,000 mt/year of nickel, with around 450,000 mt of that coming from nickel pig iron, he said. The country imports the remaining 400,000 mt in the form of nickel concentrate, nickel matte and nickel metal and does not draw down nickel from the London Metal Exchange, Loughner said.


To make its domestic supply of NPI, China uses RKEAF production, which requires laterite ore with a minimum grade of 1.8% nickel and less than 25% iron content, which comes mostly from Indonesia.

"Therefore the potential Indonesian ban can seriously cap NPI production going forward," Loughner said.

Indonesia wants to impose the ban to see more nickel processing conducted domestically, and Loughner said the "political noise" coming out of Indonesia over recent weeks suggests an outright ban or at least a choking of supply and increased taxes.

"We will see how it plays out, but with the ban due on January 12, 2014, no matter what form it ultimately takes, it is likely to have a positive impact on the nickel price," he said.

China's growing demand and the impact of pollution and energy efficiency regulation on Chinese nickel pig iron output are other factors likely to drive global nickel prices in 2014, he said.

Western Areas' production guidance for fiscal year 2014 is 24,000-26,000 mt of nickel in ore and 23,000-24,000 mt of nickel in concentrate, with cash costs of A$2.80/lb-A$2.90/lb (US$2.49/lb-US$2.58/lb).

The Perth-based company produces nickel from its Spotted Quoll and Flying Fox mines in Western Australia.

--Marnie Hobson, marnie.hobson@platts.com --Edited by Lisa Miller, lisa.miller@platts.com