Indonesia is weighing whether to bring forward a planned ban on exports of mineral ores, the country’s trade minister said, a day after nickel prices from London to China surged on speculation the Southeast Asian nation will halt shipments.
President Joko Widodo is gathering inputs from the Ministry of Energy and Mineral Resources about the impact of banning shipments earlier than 2022, Trade Minister Enggartiasto Lukita told reporters in Jakarta on Friday. No decision has yet been made and any such plan will require “thoughtful consideration” as it will hurt the country’s exports, he said.
“The impact of such a ban—if implemented immediately—would be stark, as Indonesia supplies about 8% of the market’s nickel units via nickel ore exports,” Citigroup Inc. analysts including Oliver Nugent wrote in an emailed note dated Thursday. Nickel will rally to $17,000 or $18,000 a ton if a ban is brought forward to before mid-2020, they said.
Nickel in London, which surged almost $2,000 a ton in intraday trading on Thursday, was down 0.4% at $15,820 by 3:06 p.m. in Hong Kong. It’s up nearly 10% this week, the most since 2017. On the Shanghai Futures Exchange, nickel pared some of its gains but closed 1.1% higher at the highest since trading began in 2015.
China demands mostly high-grade ore, which is supplied by Indonesia, said Song Minjia, analyst with Guangzhou Futures Ltd. “The near-term trading logic will be centered on concerns on nickel ore supply. Nickel prices will remain resilient.”
Quotas
While the government issues export quotas to miners with firm commitments to build smelters, it has said it will revoke the permits of companies failing to meet construction targets set out by the ministry. Lukita said an early ban may accelerate construction of downstream industry, including smelters.
In the meantime, the Indonesian Nickel Miners Association has called for consistency in the nation’s exports policy as a lot of investment has gone into developing mines. “We want the government to be consistent and not change the policy,” said Meidy Katrin Lengkey, the association’s secretary general. “Don’t run half the distance and then change the policy.”
This is not the first time that Indonesia has flip-flopped on its mineral exports policy. The government imposed a blanket ban on shipments of mineral ores in 2014 only to relax it in 2017, allowing overseas sale of surplus ore containing less than 1.7% nickel.
The producers association, consisting of 281 miners, has sought a meeting with Jokowi, as the president is commonly known, to push for the opening up of exports of low-grade ore to all miners and introduction of a monthly benchmark rate to shore up domestic prices.