SHANGHAI Indonesias nickel ore prices have fallen by nearly one-third in the first half of the year due to a combination of its depreciating currency value against the U.S. dollar and a weak stainless steel market in China, the largest consumer of the nations laterite nickel ore.
"If the U.S. reduces the scale of quantitative easing or quits easing, the rupiah will fall further," a senior nickel analyst in Shanghai said.
Nickel ore prices are denominated in U.S. dollars, and the slide in the rupiah against the dollar is putting further downward pressure on metals prices, the analyst added.
The Indonesian rupiah has fallen by as much as 13 percent so far this year, reaching the lowest level in four years Sept. 3 as inflation soared to its highest level since the 2009 global financial crisis.
The Indonesia f.o.b. price for nickel ore with a metal content of 1.8 to 2 percent fell to a low of $28 to $42 per tonne in May and June, although there was a small rally in August, according to traders. That price now stands at $32 to $46 per tonne following last months rise in Chinese nickel pig iron prices as the countrys stainless steel mills raised their purchase prices for the raw material.
Chinas port inventory of nickel ore stands at 19 million tonnes, with ore from Indonesia accounting for more than half the total.
Meanwhile, Chinese nickel pig iron prices have fallen 15 percent so far this year, with the ex-works prices of high-grade nickel pig iron with a metal content of 10 to 15 percent standing at 990 yuan to 1,040 yuan ($161 to $169) per nickel unit.
The three-month nickel contract on the London Metal Exchange ended the official session Sept. 12 at $13,660 per tonne ($6.20 per pound), down 5.2 percent from $14,405 ($6.53 per pound) Aug. 27.
A version of this article was first published in AMM sister publication Metal Bulletin.