Tag: nickel supply

Turmoil in Both Indonesian and Filipino Mining Policies Means Volatility for Nickel Supply

Nickel was said to be in a supply deficit last year of 209,000 metric tons, according to Bloomberg, and is projected to remain in deficit this year to the tune of 188,000 mt.
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The Philippines has just ordered the closure of 21 mines and the suspension of another six. The island chain is a source of around half of the country’s nickel output. After Indonesia’s 2014 export ban, the Philippines became the world’s largest exporter of nickel ore and the primary supplier to China’s massive nickel-pig iron industry, raw material for the alloying of stainless steel.

Stagnant Prices

Yet, while there has been an uptick in prices, nickel’s performance can hardly be said to have been stellar. Since the middle of the summer the London Metal Exchange‘s LMEX index of six key base metals is up almost 18% yet nickel has risen by only 1.2%.
Deficit or not, the market does not seem to be in short supply yet. Between Indonesia and the Philippines the two countries produced about 700,000 metric tons of nickel a year in 2014 and 2015, with about 170,000 mt of that coming from Indonesia due to the export ban.
Chinese buyers simply switched to the Philippines as supplies dried up from Indonesia and drew down on extensive stocks they had amassed in advance of the export ban. Just as the Philippines’ new firebrand environment and natural resources secretary, Regina Lopez, moved to close environmentally damaging open pit mines, Indonesia is increasing exports again. Investors have their eye on a probable surplus towards the end of the decade as both countries return to some level of consistent supply. This graph illustrates the rise of the Philippines and since the export ban the relative decline of Indonesian shipments.
[caption id="attachment_83144" align="alignnone" width="530"]Nickel production Nickel from major producers in the last nine years. Source: U.S. Geological Survey.[/caption]
Of course, it’s not clear at this stage how quickly mining companies will be able to implement stricter environmental conditions that are likely to be applied by the new administration of Philippines President Roderigo Duterte, but it would seem that the action is not unjustified with comments in the Financial Times describing the Philippines’ nickel supply chain as an environmental disaster.
Under such complex, conflicting circumstances — Indonesia potentially easing export restrictions and allowing an increase in low-grade ore exports, against the Philippines rather heavy handed closure of half the country’s nickel miners — it is difficult to read the direction prices could take in the first half of the year.
At 18%, net short positions are the highest in futures markets for any of the base metals. Investors are taking a bearish view. We are not so sure Indonesia’s return to exports is going to open flood gates, conditions are being applied and the impact could be limited. Likewise, we do not see a quick fix to the Philippines position, it seems genuinely driven by a strongly held view that open pit nickel mining is causing extensive environmental degradation and only drastic action will achieve a remedy; with such a commitment exports could be restricted for some time to come.
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While nickel is unlikely to do an about face and start a bull run, buyers should keep a close watch on developments in these two southeast Asian suppliers, they are the swing producers and have the potential to unwittingly cause price mischief in the year ahead.

Indonesia Lifts Ban, Allows Nickel, Bauxite Ore Exports

Indonesia Lifts Ban, Allows Nickel, Bauxite Ore Exports

Indonesia introduced new rules last week that will allow exports of nickel ore and bauxite and concentrates of other minerals under certain conditions in a sweeping policy shift by the key global supplier, Reuters reported.
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A ban on unprocessed ore exports was imposed in 2014 to, the thinking went, encourage investment in mills and smelters in the islands. The government of Southeast Asia’s biggest economy has faced a hefty budget deficit since and missed its 2016 revenue target by $17.6 billion.
The resumption of shipments may have been drafted to help stop the gap.
The new regulations, which took effect on Wednesday, sent nickel prices tumbling more than 5% to a four-month low of $9,660 a metric ton before they recovered.
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The rules include broad changes to permit extensions, which may now be applied for up to five years in advance of expiration, as well as new divestment requirements.

Nickel Prices Rise as the Philippines Orders More Mine Suspensions

Nickel prices got a boost on Tuesday after the Philippines announced plans to suspend 20 more mines.

[caption id="attachment_81130" align="aligncenter" width="500"]3M Nickel price on the LME. Source: MetalMIner analysis of fastmarkets data Three-month nickel price on the LME. We recommended hedging back in June. Source: MetalMIner analysis of fastmarkets data.[/caption]

The country already suspended 10 mines during the third quarter. The Philippines is by far the largest nickel ore supplier to China since Indonesia imposed an export ban for unprocessed material back in 2014. Lower production is already showing up in the numbers. Philippine nickel production is down 24% for the first seven months of this year. This supply deficit will widen as more mines are suspended.

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Combining the previously suspended mines with those in the new announcement, only one fourth of Philippines mines comply with the country’s environmental and mining laws. It’s estimated that this combination accounts for half of the Philippines’ nickel production last year.

What This Means For Metal Buyers

In our Monthly Outlook, we recommended in June buying nickel/stainless forward one-year out. The new shutdowns are likely to further tighten the global nickel market, which could provide another attractive entry point for nickel/stainless buyers to hedge/buy forward again. To catch these opportunities, buyers only need a good a plan.

More Nickel Supply If Indonesia Eases Export Ban

More Nickel Supply If Indonesia Eases Export Ban

If nickel’s outlook already wasn’t good, now it could get worse as Indonesia’s energy minister said recently that the country could ease its ban on nickel ore exports.

[caption id="attachment_77150" align="aligncenter" width="500"]Three-month nickel LME price. Three-month nickel LME price. Source: MetalMiner analysis of Fastmarkets data.[/caption]

In January of 2014, Indonesia implemented an export ban on nickel ore. The idea behind it was to encourage firms to build smelters to create jobs and shift exports from raw materials to higher-value finished metals. But instead, Indonesia has simply lost billions of dollars as the Philippines has picked up the raw ore slack for, mainly, Chinese producers.

Back in 2014 when the ban was implemented, nickel was trading above $15,000 per metric ton. However, Indonesian companies didn’t expected that nickel would be trading today at half that price. Because of falling nickel prices, many of the smelters that miners intended to develop have not materialized. Now, the government is going to review its export ban policy as miners struggle and Indonesia´s smelting capacity will not be sufficient by next year amid miners’ unwillingness to develop those costly smelting operations.

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In theory, more nickel ore flowing out of Indonesia will only continue to drive prices lower. Nickel recently fell to a near 13-year low although prices made some progress last week, rising with the rest of the metal complex. If Indonesia actually eases its export ban, nickel won’t likely be the first industrial metal to turn up…

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