Lift of Indonesia ban – game changer for stainless

Kvartalsrapport för råvaror från HandelsbankenOn Wednesday, January 11, Indonesia announced that it would state a change in its policy on ore exports later in the week. This led to a 4% drop in the nickel price at the end of trading on that day. Then, on Thursday, January 12, Indonesia announced that it is lifting its ban on ore exports. In Thursday’s trading, the nickel price pared its losses at 5% but then rebounded later and closed unchanged from the January 11 price. The opening of Indonesian ore exports is set to have longer-term effects on nickel prices and the stainless steel industry.


Various commodities are produced in Indonesia, but the ban had its greatest impact on nickel markets. Nickel ores produced in Indonesia bear around 1.7-1.9% nickel content and served as the key raw material (feed) for Chinese stainless steel pro-duction after being transformed into the intermediary product nickel pig iron (NPI) in Chinese refineries. The other alternative source, the Philippines, has similar nickel-bearing ores but these are available at a poorer quality, i.e. a lower nickel grade. At its peak, in 2013, Indonesia supplied nearly 16% of the world nickel supply.

The ban

IndonesiaIndonesia introduced its ban in 2014 as an investment incentive for downstream smelting capacity, to obtain more value out of the ore for Indonesia. We travelled to Jakarta in early 2015 to dig into the details: our key impression was from a Chinese NPI producer who commented, “The value in Indonesian ore for China is only there if we are able to use our existing, domestic refining capacity to process the material. If we first need to invest and build need refineries, there is no scope for economics.”

PhilippinesThe ban was further undermined by a ramp-up of nickel production in the Philippines, which was surprisingly successful in grasping the available market share during In-donesia’s ban. Indonesia’s hoped-for boost in the nickel price did not take place and further reduced incentives to invest in new capacity there.

Where does it go from here?

Indonesian exporters of low-grade nickel ore have struggled to process ore inside Indonesia, and will now be allowed to export in conjunction with commitments to build refineries within five years. However, we believe that the stipulated conditions are vague and meaningless.

We argue that nickel units will start to flow into China again, and thereby compen-sate for President Duterte’s environmental campaign that has closed nickel mines in the Philippines. We had previously expected that the final tonnes of Filipino nickel stock would have been drawn down in 2017, which would have resulted in higher nickel prices.

Lifting the banWe believe that the effects on nickel prices of lifting the Indonesian ban will be lim-ited, and we expect the price to stabilise in the USD 10,000/tonne area. However, we take back our outlook for a peak price of USD 13,800/tonne after this game changer. The Chinese nickel feed has been sourced in local prices in the South East Asian market, and as ore stocks were not fully depleted, China never turned out to be a significant importer of Western nickel units.

ChinaIn our view, the greatest effect of looser Indonesian export restrictions will be seen in stainless steel markets. China will benefit from lower production costs for stainless steel and competition on the export market will increase.

Materialet producerat av Handelsbanken och publiceras i samarbete och med tillstånd på Rå


Detta material är producerat av Svenska Handelsbanken AB (publ) i fortsättningen kallad Handelsbanken. De som arbetar med innehållet är inte analytiker och materialet är inte oberoende investeringsanalys. Innehållet är uteslutande avsett för kunder i Sverige. Syftet är att ge en allmän information till Handelsbankens kunder och utgör inte ett personligt investeringsråd eller en personlig rekommendation. Informationen ska inte ensamt utgöra underlag för investeringsbeslut. Kunder bör inhämta råd från sina rådgivare och basera sina investeringsbeslut utifrån egen erfarenhet.

Informationen i materialet kan ändras och också avvika från de åsikter som uttrycks i oberoende investeringsanalyser från Handelsbanken. Informationen grundar sig på allmänt tillgänglig information och är hämtad från källor som bedöms som tillförlitliga, men riktigheten kan inte garanteras och informationen kan vara ofullständig eller nedkortad. Ingen del av förslaget får reproduceras eller distribueras till någon annan person utan att Handelsbanken dessförinnan lämnat sitt skriftliga medgivande. Handelsbanken ansvarar inte för att materialet används på ett sätt som strider mot förbudet mot vidarebefordran eller offentliggörs i strid med bankens regler.

Lämna ett svar

Din e-postadress kommer inte publiceras. Obligatoriska fält är märkta *

scroll to top