It was reported that the proposed 2014implementation date of Indonesia nickel ore export ban will be adjusted to May 7th, 2012, which triggered market players concern over Indonesia’s nickel ore export restriction.
SMM Survey Result: 60% Market Players Skeptical Towards the Implementation of the Ban
Market players’ responses were mixed over the news. Based on result of an SMM survey on 16 domestic nickel ore traders, 60% traders believe that the Indonesian government is unlikely to strictly implement nickel ore export ban in the short time, holding that the new is released to fuel expectation over nickel ore supply shortage and to push up nickel prices, since current nickel prices are sluggish. According to a market player from North China, since the news is released by Indonesia Ministry of Energy and Mineral Resources but not released by Indonesia Ministry of Commerce, and actual execution of the adjusted implementation data will not be forceful. The remaining 10% players believe that market players should attach importance on this news.
SMM Viewpoint: Indonesia Aims to Raise Nickel Ore Export Industry Entrance Requirements
SMM believes that possibility for Indonesia to ban exports of nickel ore is very small. According to SMM sources, shipping activities of nickel ore from Indonesia to China, a major consumer of Indonesia nickel ore, are normal. If Indonesia strictly implements the export ban in very short time, it will do harm to both two countries. In addition, the Indonesia Mining Industry Expert Association president Irwandy Arif also believes that Indonesia will meet difficulties in fully implementing the nickel ore export ban in 2014.
SMM believes that Indonesia may want to take the opportunity to raise nickel ore export industry entrance requirement. According to sources from Indonesia, Indonesia may restrict exports of nickel ore by hiking export tariff or controlling export quotas from May 7th, 2012, but it will not fully ban exports of nickel ore. News from Indonesia says that Indonesia will further overhaul mine exploration and export rights at mine operators and will raise and standardize nickel ore mining and export industry entrance requirements.
Impact on China: China Nickel Industry Negatively Affected
Indonesia exported 25.71 million mt of nickel ore to China in 2011, 53% of China's total imported nickel ore. In 2011, number of nickel ore traders increased in 2011 due to growing profit margin, but profits at NPI and stainless steel mills were further squeezed.
Transactions of nickel ore are expected to be more brisk in 2012, as a large number of NPI producers still need plenty of nickel ore for production. SMM believes that China’s domestic nickel ore traders and NPI producers will be negatively affected if Indonesia implements nickel ore export ban. Small-sized NPI producers that don't have stable nickel ore supply channels may face shut down risks.
Butterfly Effect: Stocks of Jinchuan Intel Surge
Stock prices of Jinchuan Intel surged by 30% in Hong Kong stock market last Thursday, and market players believe that the stock price surge of Jinchuan Intel is closely related to Indonesia’s ore export ban.
Last Friday, it was reported that Philippine president Aquino III was disusing an administrative draft with some departments last Wednesday. The draft include bidding for mine exploration contracts and mining rights as well as tax hike on mining companies.
Indonesian Minister for Energy and Mineral Resources Jero Wacik has signed a ministerial regulation to ban exports of metal ore beginning 2014, including nickel ore. According to the regulation, all kinds of metal raw materials should be processed in accordance with stipulations of 2009 National Mineral and Coal Law. Those that fail to abide by the stipulations shall be punished by written warning, suspension of mining activities and revoke of business license etc.