Singapore 10/10/2016 - The impact on the nickel market would be huge with nickel prices to come under pressure should Indonesia restart nickel ore exports next year, Chinese market participants told FastMarkets.
Indonesia could export up to 15 million tonnes of nickel ore in 2017 should it amend a ban on unprocessed ore exports, Reuters cited Teguh Pamudji, secretary general at the Energy and Mineral Resources Ministry, as saying in a report last Friday, October 7.
“15 million tonnes of ore will make up close to half of what China imports annually. The impact will be huge once Indonesia starts exporting again,” a Beijing-based nickel ore trader said.
Indonesia’s mining minister Luhut Pandjaitan had said earlier this month that the government is looking to change its export rules for nickel ore which has 1.8-percent metal contained as they cannot be processed domestically.
“15 million tonnes, or even 10 million tonnes, would more than make up for any possible shortfall from the Philippines,” a nickel analyst with a Guangzhou-based hedge fund said.
Nickel ore exports from the Philippines are expected to fall around 20 percent this year amid the country’s mining clampdown, as well as prolonged heavy rains which hampered mining in and shipments from the country earlier this year.
China’s nickel ore imports from the Philippines – its largest supplier of the raw material since Indonesia introduced its export ban on mineral ores in 2014 – are so far down 21.3 percent year-on-year to 17.99 million tonnes during the first eight months of the year.
Indonesia restarting its nickel ore exports will also probably result in Philippine miners lowering their nickel ore prices to compete with Indonesian miners, and this will put further pressure on nickel prices, market watchers said.
“Users prefer Indonesian ore due to their higher nickel content and Philippine miners will likely have to cut prices to compete,” the trader pointed out.
Indonesia produces medium- and high-grade saprolite nickel ore with nickel content of 1.8 percent and above, while the majority of nickel ore produced in the Philippines are low-grade limonite ore of 1.5-percent or lower nickel content.
In the near-term, the impact on nickel prices may be limited as China is seeing good nickel ore demand during the peak demand period of September-October, and stockpiling activities ahead of the start of the Philippines rainy season, sources said.
But prices could start coming under pressure once stockpiling activities is completed, they noted.
Market participants also noted that there is no nickel ore supply tightness in the Chinese market now with Chinese nickel ore port stocks estimated at around 15-16 million tonnes, up from 14 million tonnes in mid-September.
The three-month nickel price on the London Metal Exchange was last at $10,420 per tonne on Monday on Select, up $220 from Friday’s close.