Monday 2 September 2019 3:37 pm

Nickel soars as Indonesia bans ore exports

Indonesia today said it would bring forward a planned nickel ore export ban to the beginning of next year, sending prices up to an almost five-year high.

The country, which is the world’s biggest producer, said that exports of all grades of nickel ore will be stopped from 1 January 2020, even if companies have contracts in place.

Read more: Miners drag down FTSE 100 after iron ore prices dip

The move sent nickel prices up 5.3 per cent to $18,850 today. But markets already rose nine per cent on Friday when Reuters first reported the news.

Today Bambang Gatot Ariyono from the Ministry of Energy and Mineral Resources confirmed the report.

He said that suppliers were being given four months notice so they could transition to the new system.

The government has been pursuing the ban as it tries to bring more parts of the production line back into Indonesia.

It hopes that by banning ore exports, Chinese smelters will have to set up in Indonesia, bringing much-needed foreign investment. However the plan may backfire, said Nitesh Shah at Wisdom Tree.

“A lot of companies were preparing for this ore ban to come in 2022, so they were setting up smelting facilities in Indonesia. But this has happened way too early and could potentially lead to some projects stalling as they cannot sell the ore for near-term financing,” Shah said.

The country is the world’s largest producer of nickel ore, supplying around 26 per cent of global needs last year, according to data from the International Nickel Study Group.

The metal is used primarily for steel production, but is also important for batteries. Shah said that Indonesia is trying to set itself up to prepare for nickel’s transformation as electric vehicles take off.

Read more: BHP bets on batteries as it decides to keep its Australian nickel mine

In a note on Sunday, Goldman Sachs said that bringing the ban forward two years to this coming January would hike prices to $20,000 per tonne in the next three months.

But as the market corrects for the new conditions, prices will fall again, reaching $18,000 in six months, and $16,000 within a year.