Column: Nickel jumps but fear of Indonesia export ban is unfounded – by Andy Home (Reuters U.K. – July 17, 2019)

LONDON (Reuters) – Nickel is enlivening an otherwise torpid summer for the base metals complex. The market is on a bull charge in both London and Shanghai. London Metal Exchange three-month nickel has jumped 23% since the start of June and at a current $14,250 per tonne is trading at its highest level in a year.

Chinese speculators are surging into the Shanghai Futures Exchange contract, which is also nudging one-year highs. The trigger for this collective exuberance is news that Indonesia will stop allowing the export of unprocessed nickel ore in 2022.

Since this is a key raw material pipeline for China’s giant nickel pig iron (NPI) sector, the price reaction might seem rational. Except that the “news” is not new. The 2022 deadline was set in 2017, when the Indonesian government allowed a five-year grace period for ore exporters in return for investment in processing capacity.

How much nickel ore the country will be exporting come 2022 is also a highly moot point. But such niceties have done nothing to damp speculative buying interest, proof perhaps that Goldman Sachs was right when it described nickel as behaving like a biotech stock.

Indonesia introduced a ban on the export of unprocessed minerals in January 2014 with the explicit aim of forcing miners to build domestic processing capacity. The nickel market was caught unawares, even though the law had been pending for five years. The price surged to a mid-2014 peak of $21,625.

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