What’s on the Horizon for Nickel Prices?

Over the last little while, nickel has been the talk of the town. Pricing surged over the summer months on the back of electric vehicle optimism and speculation surrounding Indonesia bumping up a planned nickel ore export ban.

As of early this week, the ban became a reality when Indonesia’s Ministry of Energy and Mineral Resources officially announced the ban will go into effect on January 1, 2020, ahead of the originally planned January 2022 date. Nickel prices immediately jumped on supply concerns as Indonesia is the world’s largest producer of the commodity.

Unsurprisingly, experts from around the space have begun to weigh in on what all of this means for the future of nickel pricing and supply.

Before the storm

To give a proper idea of why Indonesia’s fresh announcement is shaking things up, it’s important to understand the steps that led to this place. In 2014, the country banned the export of unprocessed minerals in an attempt to push miners into processing domestically.

However, by 2017 the country had relaxed the ban and was allowing sales of surplus ore containing less than 1.7 percent nickel. It is believed that the ban was eased partly due to a dent in revenues, which, according to Reuters, were US$17.6 billion lower than targeted in 2016.

Despite the break, Indonesia had planned to reinstate the ban by 2022 to continue its efforts towards having miners build local smelters and process ore within the country.

Fast forward to the summer of 2019, and rumors had begun to swirl that Indonesia was planning to move the ban ahead to 2020.

The news, which broke around August 7, sent nickel prices skyrocketing from US$14,735 per tonne on the London Metal Exchange to US$15,490 in a single day of trading. This marked the commodity’s biggest one day climb in London since 2009.

Chart via the London Metal Exchange.

“Indonesia and the Philippines have been hotbeds for nickel news for awhile, and with good reason as they collectively make up a major portion of the world’s supply,” Brian Leni, founder of Junior Stock Review, told the Investing News Network (INN) prior to the ban’s formal announcement.

“At the moment, Indonesia has had arguably the largest impact on the nickel price with talk of a nickel export ban.”

On the docket

With the ban now in motion, analysts and investors alike have had to shift their mentality from speculative to observational. While the various pieces of the puzzle could still move, experts have weighed in on what the ban means for now.

A fresh report from Wood Mackenzie explains that it’s unlikely 2019 nickel production will be impacted by the ban. However, the firm raised concerns about the future of global supply.

“From 2020, the export ban is expected to result in a loss of 16,000 tonnes, 190,000 tonnes in 2021, 112,000 tonnes in 2022 and 85,000 tonnes per year from 2024 onwards. We do not believe that the total forecast loss in production in 2021 can be offset by a production increase in Indonesia,” the report reads.

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