Indonesia to stop nickel ore exports in 2020

Indonesia has brought forward a nickel ore export ban by two years and will stop delivering low-grade ore from January 2020, the ministry of energy and mineral resources said today.

Under the new policy, ore containing less than 1.7pc nickel will not be allowed to be exported from 1 January next year.

"We have signed the regulation, which is essentially about terminating nickel export incentives for smelter builders as of 1 January 2020," director-general Bambang Gatot Ariyono said.

Ahead of the announcement on the ministry website this morning, the three-month nickel contract traded on the London Metal Exchange (LME) surged to $17,800/t on 30 August, gaining $1,525/t on the day, and up by $5,680/t or 47pc since the beginning of July. The three-month nickel price is at its highest since 18 September 2014.

The export ban was initially planned to take effect from 2022 but the Indonesian government has changed its plans after months of discussions, to speed up the development of the domestic nickel refining and smelting industry.

In the past few years, Indonesia has implemented policies to encourage the development of value-added refining industries in the country, which would generate more income than ore exports.

According to the ministry, 11 nickel smelters have been built and 25 are under construction.

The policy also aims to preserve existing proven nickel ore reserves, estimated at 698mn t, which will only meet demand for seven years if no new reserves are found.

As the Chinese stainless steel industry relies heavily on Indonesia's nickel ore as feedstock to produce nickel pig iron (NPI), the ban will have a severe impact on NPI supply in China.

Indonesia is the largest nickel ore producer in the world, followed by the Philippines. Indonesia exported 20.72mn t of nickel ore and ferro-nickel last year. The majority of this, 19.9mn t, was delivered to China to feed the country's stainless steel industry, trade data show.

But some Chinese stainless steel producers have already set up operations in Indonesia.

Integrated Chinese-owned stainless steel producer Tsingshan operates a 3mn t/yr mill in Indonesia and also owns nickel and chrome mines in the country.

And Chinese producer Delong Holdings' Indonesian joint venture Dexin Steel was due to become operational this year.

Nickel is one of the key materials in stainless steel production and the industry accounts for about 70pc of global nickel consumption. It is also increasingly important for the battery industry as nickel is a key component in lithium-ion batteries for electric vehicles.