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Indonesia export ban may lift import prices

Jan 13, 2014 | 05:38 PM |

Tags  nickel, nickel prices, stainless steel, London Metal Exchange, Indonesia ban, China stainless, stainless imports, import prices Citi Research

NEW YORK — Indonesia’s plan to ban nickel ore exports won’t have an immediate impact on refined nickel supply in North America, but it could eventually drive Chinese stainless steel prices higher, relieving pressure on domestic producers by Chinese imports, market participants said.

The much-discussed Jan. 14 ban on Indonesian raw material exports, put in place by the country’s government to boost its domestic industry, has already influenced nickel prices. The London Metal Exchange’s three-month nickel contract ended the official session at $14,050 per tonne ($6.37 per pound) Jan. 13, up 2.4 percent from $13,725 ($6.23 per pound) Jan. 10.

While Chinese producers reportedly have up to a year’s worth of nickel contained within ore stockpiles in the country, numerous analysts and industry sources said, the ban is expected to limit the long-term supply of low-cost material that is feeding China’s thriving stainless sector. Indonesia accounted for 20 percent of global nickel production in 2013, and 65 percent of Chinese nickel ore imports, according to analysis by Citi Research.

In turn, that could affect the cost of Chinese stainless production in the future, which would impact the cost of material shipped to North America and the rest of the world.

"The fact of the matter is that doesn’t mean much to the physical demand in the U.S. because we have scrap," one trader source told AMM. "The positive thing for us is that the Chinese will have to produce stainless at a higher cost, which would mean stainless steel (imports) would go to a higher price and more stainless steel would be produced (domestically)."

Increased refined nickel usage in China could even result in "more tightness in the U.S.," a second trader source agreed.

"The only real way it’s going to have an effect is if it’s enforced for the next 12 to 18 months," the second source said. "Then you’ll see an effect. It would drive up the price of the entire nickel market."

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