Nickel prices surge after Indonesia announces 2020 export ban

Nickel prices reached a five-year high yesterday after the Indonesian government said it would ban exports of the metal in 2020, as it looks to expedite the development of a domestic smelting industry.

The announcement by the world’s second largest nickel ore exporter ramped up fears of a global supply deficit, pushing prices on the London Metal Exchange up to US$18,785 per tonne in the process.

Indonesia confirmed the export ban, which was first announced in 2014 but later delayed until 2022, would be applicable to all nickel ore, including production for the Chinese nickel pig iron (NPI) industry.

“This cuts off one of the major sources of raw material to the Chinese NPI industry, and leaves a hole of around 100,000 tonnes per annum in the nickel market for the next couple of years,” said Colin Hamilton of BMO Capital Markets.

Indonesia’s director general for mining and coal at the Energy and Mineral Resources Ministry Bambang Gatot Ariyono told reporters in Jakarta that the government had decided to expedite smelter construction.

“So we took the initiative to stop exports of nickel ores of all quality,” he explained, adding that new technology meant low grade material could now be used in batteries.

The ban could see the price of nickel rise to $20,000 a tonne over the next three months, according to analysts at Goldman Sachs, which would create considerable uncertainty among large consumers.