September 2, 2019 / 7:34 AM / 22 days ago

UPDATE 4-Global nickel supply to drop on Indonesia's ore export ban in 2020

    * Ban to begin on Jan. 1, two years ahead of schedule
    * LME nickel price surges to most in 5 years
    * Global nickel market facing 100,000 T deficit next year
    * Indonesia to have additional $20bln investment -minister

 (Adds investment estimate from senior minister)
    By Wilda Asmarini and Bernadette Christina
    JAKARTA, Sept 2 (Reuters) - Indonesia said on Monday it will
stop nickel ore exports from Jan. 1, 2020, two years earlier
than initially indicated, as it speeds up efforts to process
more of its resources at home.
    Bambang Gatot Ariyono, the director general for coal and
minerals at the Ministry of Energy and Mineral Resources, said
the ban will be applicable to all grades of nickel ore and
ordered exporters to stop shipments from that date regardless of
standing contracts.
    "That is why we are announcing now so they have four months
of transition time," Ariyono told reporters. 
    Nickel prices have surged on speculation about an expedited
ban and Monday's announcement. The three-month nickel contract
on the London Metal Exchange rose as much as 5.3% to
$18,850 a tonne on Monday, its highest in nearly five years,
adding to Friday's 9% gain.    
    Goldman Sachs said in a note on Sunday it expects London
nickel prices to reach $20,000 per tonne in three months due to
the ban.
    Indonesia, the world's biggest nickel ore producer,
accounted for 26% of global nickel ore supply last year,
according to the International Nickel Study Group, and the ban
will affect the supply of ore to China, the world's biggest
nickel consumer.
    China imports the ore to produce nickel pig iron (NPI) that
is then used to produce stainless steel. The ore ban is likely
to disrupt China's NPI output, though Indonesia may be able to
make up the shortfall. 
    Antaike, the research arm of the China Nonferrous Metals
Industry Association, said in a note on Monday the global nickel
market will be in a deficit of more than 100,000 tonnes in 2020
due to the expedited ban, as opposed to a 40,000 tonne deficit
without it.
    Companies that produce nickel, also used for batteries for
electric vehicles, are calculating how long their current ore
inventories will last, Antaike said. 
    Nickel ore stockpiles at Chinese ports stood at 13.33
million tonnes as of Aug. 30, of which 2.76 million tonnes were
from Indonesia and 10.46 million tonnes were from the
Philippines, Antaike Chief Nickel Analyst Xu Aidong said.
    "Maybe some Philippines nickel ore will replace or offset
the shortage but it couldn't meet all the requirement for the
Chinese companies because the grade of Philippine nickel ore is
lower than that of Indonesia," Xu said.
    Indonesia had initially said it would ban nickel ore exports
from January 2022, according to a rule released in 2017. On
Monday, Ariyono said the timetable was expedited because of the
limited pool of mineable nickel resources. 
    "The national proven reserve for nickel is only 698 million
tonnes, which can only supply smelting facilities for 7.3
years," he told reporters, adding that Indonesia currently has
11 working smelters with input capacity of 24 million tonnes of
ore. It has 25 more smelting facilities in the pipeline. 
    While the nickel ore ban has been moved up, Indonesia will
end exports of bauxite and copper concentrates in 2022 as
    Local miners have complained that their smelter projects
will stall if exports are cut off, stopping the revenue stream
needed to finance development. Ariyono said miners should not
rely only on revenue from exports to finance their smelters.  
    State miner PT Aneka Tambang (Antam) is ready to
support the new policy, Chief Executive Arie Prabowo Ariotedjo
said in a text message, adding that the rules will benefit
companies that already have smelters such as Antam. 
    The government aims to have 36 nickel smelters by 2022 with
a total input capacity of 81 million tonnes.
    Ariyono, said there are four mega projects among the 25
smelters currently in the pipeline.
    These projects will help Indonesia accelerate the
development of its electric vehicle (EV) battery industry, he
    Luhut Pandjaitan, coordinating minister overseeing mining,
said investment into nickel processing plants has reached $10
billion and expects an additional $20 billion in the next five
    "We will have the supply chain and become a global player in
lithium battery production through to electric vehicles,"
Pandjaitan said.
    Indonesia has put the export ban in place to support the EV
battery industry by keeping cobalt resources, which are
important for lithium batteries, in the country since they are
typically found in the low-grade nickel ores that are shipped
out, said Sukhyar, an official with the Industry Ministry, who
previously was director general for coal and minerals. 
    "We are talking about building industry for electric
vehicles, which need cobalt as material. Why are we exporting
them?," he said.
    The following is a table of the four largest nickel
processing plants currently being constructed in Indonesia.     
 Project         Investment  Input     Output
 Huayue          $1.28 bln   11 mln    60,000 tonnes of nickel,
 Bahadopi                    tonnes    7,800 tonnes of cobalt
 QMB Bahodopi    $998.5 mln  5 mln     50,000 tonnes of nickel,
                             tonnes    4,000 tonnes of cobalt
 Halmahera       $10.6 bln   8.3 mln   278,534 tonnes of mixed
 Persada Lygend              tonnes    hydroxide precipitate,
                                       nickel sulphate, cobalt
 Smelter Nikel   n/a         2.4 mln   76,500 tonnes of mixed
 Indonesia                   tonnes    hydroxide precipitate,
                                       nickel sulphate, cobalt
 (Reporting by Wilda Asmarini, Bernadette Christina Munthe;
additional reporting by Tom Daly in BEIJING; Writing by
Fransiska Nangoy; editing by Christian Schmollinger, Jane
Wardell and David Evans)
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