COLUMN-China throws cold water on nickel bulls – by Andy Home (Reuters India – September 23, 2014)

http://in.reuters.com/

(Reuters) – It’s now a full eight months since Indonesia turned off the supply of nickel ore to China’s giant nickel pig iron (NPI) sector.

The unexpected fulfilment in January of a long-standing promise to ban exports of unprocessed minerals such as nickel ore sent the London nickel market on a super-charged rally, which peaked in May at a high of $21,625 per tonne.

Much of those gains have since been given back as the market kicks its heels waiting for some tangible sign of supply stress, not least in China. On the London Metal Exchange (LME), benchmark three-month nickel was trading either side of $17,000 on Tuesday morning.

China, however, is not playing its expected role in the nickel story, the country’s latest trade figures representing another dousing of cold water for the many nickel bulls.

Not that there has been any resumption in Indonesian exports of nickel ore. China’s trade figures for August showed imports of just 39,000 tonnes, very much in line with the previous three months. This material is, in all likelihood, iron ore with a high nickel content that China’s customs department has misclassified.

Moreover, the latest figures from the International Nickel Study Group show Indonesian mined nickel output collapsing to 138,000 tonnes in the January-July period from 421,000 tonnes a year earlier.

Indonesian production and Chinese import figures confirm the seismic changes under way in Indonesia, which is using the ban to force its mining sector down the value-added route of processing.

However, what is surprising is the volume of material now flowing to China from the Philippines.

The latter has historically been the second-most important source of ore for China’s NPI producers, but less favoured than Indonesia because its ore is lower-grade.

As such, it was widely expected that Chinese imports from the Philippines would rise after the Indonesian ban as NPI players attempted to diversify their sourcing of raw materials.

But not to the extent we’re now seeing.

Imports of ore from the Philippines topped 5 million tonnes in August for the second month running. Indeed, August’s tally of 5.33 million tonnes marked an all-time high with cumulative imports in 2014 now up 26 percent at 22.61 million tonnes.

For the rest of this article, click here: http://in.reuters.com/article/2014/09/23/china-nickel-home-idINL6N0RO2P920140923