Indonesia’s ban on raw minerals exports threatens nickel shake-up – by Melanie Burton (Reuters U.S. – January 10, 2014)

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SYDNEY – Jan 10 (Reuters) – An Indonesian ban on raw minerals exports is set to hurt Chinese factories making stainless steel – used in everything from kitchenware to cars and buildings – in the biggest potential industry shake-up in more than five years.

The ban, due to come in force on Sunday, may also be a boon for battered nickel miners, dogged by prices that lost 19 percent last year and are sitting stubbornly near four-year lows.

Indonesia looks set to prohibit more than $2 billion worth of annual nickel ore and bauxite shipments as part of a plan to push miners into downstream processing and boost long-term returns from its mineral wealth.

The Southeast Asian country supplies about half the nickel ore used for stainless steel in China, the world’s biggest producer and exporter of the corrosion resistant material.

China mostly produces a lesser quality version, unlike high-end competitors in Japan, Germany and Korea, which is often used in the inside of buildings or internally in cars, where it reinforces framework.

Stainless steel is also used in oil and gas pipelines, and a raft of products such as kitchenware – from brushed stainless steel stove tops to cookers and extractor hoods.

Nickel prices have so far failed to react to the looming ban, reflecting widespread scepticism in the market that Indonesia will stick to its guns given a history of backing away from controversial policies in the past.

But Jakarta has recently held firm on moves to bolster its tin industry, and its latest proposal on mineral ore exports will only delay the full impact of the ban in some areas.

“If the ban stays in place, nickel prices sustain a rally and costs are passed on, that would eventually feed into end-use consumer goods – pots and pans, to buildings, to factories,” says Barclays analyst Sijin Cheng in Singapore.

MARKET WAITS AND WATCHES

London Metal Exchange (LME) prices are near four-year lows of $13,205 hit last July, a legacy of boom-time investment in new mines that boosted supply after nickel prices soared above $50,000 a tonne in 2007, while stocks are at record highs.

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