Mar. 22 -- Nickel-ore and bauxite shipments from Indonesia (WBMKOPID), the top supplier to China, may plunge 75 percent this year as a ban on metal-ore sales comes into force in May, two years earlier than scheduled, said an industry group.
The ban, originally set for 2014, was brought forward as exports surged in the past three years, Syahrir Abubakar, executive director of the Indonesia Mining Association, said in an interview. The country shipped 33 million metric tons of nickel ore and 40 million tons of bauxite in 2011, he said. China, the world’s biggest metals user, bought about 80 percent of its bauxite and 53 percent of its nickel-ore from the Southeast Asian nation last year, customs data showed.
Declining shipments may increase competition for supplies among Chinese processors, potentially benefiting nickel-ore mining companies in the Philippines and boosting prices. The move may increase China’s demand for refined nickel as a substitute for so-called nickel-pig iron, said Barclays Capital. Nickel has dropped 30 percent in London in the past year.
“This is definitely good news for refined nickel prices in the long term,” said Xu Aidong, a nickel analyst at metals researcher Beijing Antaike Information Development Co. “We could also see ore prices rising.”
While some miners may try to boost sales before the ban, rain and port constraints will curb shipments, Abubakar said in a March 14 interview. Nickel-ore exports soared from just 4 million tons and bauxite from 8 million tons in 2008, he said. That surge prompted the government to advance the ban on companies that hold so-called mining business licenses for production operations, he said.
Miners with Contracts of Work, including Freeport-McMoRan Copper & Gold Inc. (FCX) and Newmont Mining Corp. (NEM), will be allowed to export ores until 2014, according to the rules. The ban will affect mostly small miners as the country’s major nickel producers PT Vale Indonesia (INCO) and PT Aneka Tambang (ANTM) have already started local processing, Abubakar said.
The decree, signed by Energy and Mineral Resources Minister Jero Wacik on Feb. 6, seeks to oblige miners to process ores locally, boosting state revenues and ensuring investment. Exports will be allowed for processed metal, such as ferronickel and nickel-in-matte, and smelter- or chemical-grade alumina, according to the rule. Business license holders could be exempted if they submit ore processing plans, Wacik said Feb. 20.
Indonesia, the largest tin and thermal coal exporter, shipped 25.7 million tons of nickel ore to China last year, according to Chinese customs data. That compares with 22.1 million tons from the Philippines (CNOIIQPH). Indonesia supplied China with 36.1 million tons of bauxite, while Australia (BXCIIQAU) sold 8.4 million tons, ranking as the second-biggest supplier, the data showed.
“The critical trade market impact would be that Indonesia exports more refined metal over primary ore,” Nicholas Snowdon, an analyst at Barclays Capital, wrote in an e-mail dated March 15. The country produces 15 percent of global nickel ore and just 1 percent of refined nickel, Snowdon said. Chinese nickel- pig iron makers will find it “difficult” to fully replace lost Indonesian supplies as ore from the Philippines is used more for its iron content, he said.
“The ores from Indonesia are generally laterite ores, which means Chinese production of nickel-pig iron will be affected due to the control,” said Xu of Antaike. Nickel laterite ore can be processed into nickel-pig iron as a substitute for the refined metal for use in stainless steel.
Nickel for three-month delivery fell 1.3 percent to $18,804 a ton at 8:06 p.m. in Singapore today.