Potential Indonesian nickel export ban bodes well for prices, poorly for pig iron – by Freya Berry (Mineweb.com – October 18, 2013)

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While it is not certain the ban will go ahead unchanged, if it does, analysts say, it would be a game-changer for prices.

LONDON (REUTERS) – A potential ban on nickel ore exports by Indonesia next year and production cutbacks could lift the price of this year’s worst-performing base metal by more than 20 percent off multi-year lows, analysts said.

Indonesia, the world’s top exporter of nickel ore, has said it plans to bring in a ban on unprocessed ore exports from Jan. 1, 2014. Its ore is currently shipped to China to produce nickel pig iron, a cheap substitute for higher grade nickel in stainless steel.

It is not certain that the ban will go ahead unchanged, but if it does analysts said it would be a game-changer for prices. Benchmark nickel on the London Metal Exchange has fallen by around a fifth since January to four-year lows, weighed down by over-supply, and was trading at $13,963 a tonne at 1529 GMT on Thursday.

“It’s such an important swing factor for the market that you could see a decent rally in the nickel market if a ban is strictly enforced – at least 20 or 30 percent,” said Daniel Smith, head of metals research at Standard Chartered.

“It goes without saying that it’s pretty crucial for the Chinese nickel pig iron sector.”

Ore exports from Indonesia account for 60 percent of China’s ore imports, according to consultants WoodMackenzie. The law will require mineral ores to be processed domestically before export to encourage foreign investment and boost profits.

Analysts believe that Indonesia does not have the capacity to process the enormous amounts of ore it produces, and so the ban would strangle nickel ore exports to China, the world’s biggest importer.

“If the ban really happens, I see no alternative but large swathes of the nickel pig iron industry (in China) having to close,” said Stephen Briggs, strategist at BNP Paribas.

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