Indonesian Nickel Export Ban Leads To Shortage

Nickel prices were weak, but when the Indonesian government banned the export of unprocessed nickel ore outside the country, it caused a shock that reversed the trend in the nickel market. Mark Selby, senior vice president of business development at Royal Nickel Corp, believes that higher nickel prices and reduced inventory are inevitable as demand continues to rise and 25-30 percent of global nickel supply has been closed.

Nickel is becoming one of the best products in 2014 to capitalize on this unique set of circumstances. Under the current conditions, an acute nickel deficit is expected in the second half of 2015, and its first signs appear this month.

Since 2006, stainless steel production and nickel demand in China have grown at a breakneck pace. About 75 percent of the nickel came from Indonesia. Nickel ore from Indonesia contains 1.8-1.9 percent nickel. Notably, Indonesia is the only significant source of this class.

The Philippines can supply 10-20 percent of ore with a lower grade of about 1.4-1.5 percent. Whether this country will be able to export significantly more of this material remains to be seen.

Another place where high resources exist is in New Caledonia, but local facilities have long-term joint ventures or agreements with companies in Japan and Korea. Next on the list of potential alternative sources of ore comes Cuba or Guatemala, but these places do not have the same class and scale of resources as Indonesia, and transport costs to China will be much higher.