Indonesia surprised the mining world little over a week ago putting into effect an outright ban on nickel ore exports, against expectations of a last-minute climb down by authorities.
Indonesia accounts for around a fifth of global supply at an estimated 400,000 tonnes of contained metal and the ban was seen as a potential game changer in the market for the steelmaking raw material..
Nickel prices have reacted in a fairly subdued manner however with three-month nickel on the LME last trading at $14,650 a tonne. That’s up around 7% since the ban was implemented, but a far cry from 2013’s high of $18,700 struck in February and still near levels last seen in 2009.
Global warehouse levels have risen sharply over the past two years – hitting a record 260,000 tonnes this year according to LME data – keeping prices subdued. Ample available metal and ore combined with a 20% rise in worlwide mining output since 2011 just as the market was moving into surplus.
Independent research house, Roskill Information Services in a report out on Monday says in the short-term, Indonesia’s ban should lift prices to $16,000 or more this year as stockpiles diminish, but Roskill analysts remain “sceptical that a supply deficit is likely to emerge anywhere prior to 2017/2018”:
“Compared to other metal products, the price elasticity of nickel supply is relatively high, and any increase in nickel prices – particularly from the lows of 2013 – is expected to result in increased output. Based on estimated industry costs, for instance, an increase in nickel prices from US$14,000/t to US$16,000/t will restore profitability to approximately 200ktpy of nickel capacity, compounded by parallel price-related demand destruction. ”
The impact of the ban will be felt most heavily in China which relies on Indonesian laterite nickel ore and accounts for 50% of global demand.
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