Even though this retreated as the market took a more measured view of the nickel outlook, there is little doubt that, in the years to come, the ban will have significant implications for NPI supply.
With respect to the above, Wood Mackenzie energy consultant is looking at key issues regarding the expedited ban.
- Reasons behind Indonesia’s nickel ore ban
Linda Zhang, Research Analyst, proposes two main drivers in order to shift the ban forwards:
Firstly, she suggests that the export ban in particular will help the country preserve its nickel ore resource base in order to accommodate its rapidly growing NPI and stainless steel melting industries.
Secondly, the ban was put in place after Indonesia’s relaxation of a previous ore export ban in 2017, which only allowed nickel ore export of a grade below 1.7%. Also, the recent development of new high pressure acid leach (HPAL) projects means that the country can now process lower grade ore domestically, with a view to meeting electric vehicle (EV) battery raw material demand.
- Lost supply of nickel ore
As China is currently the primary importer of Indonesian ore, Wood Mackenzie estimates that, in 2019, Indonesia will supply China about 40% of its total ore imports, which is almost 350 kt of nickel.
A ‘hard stop’ is not expected when the ban comes into effect in January 2020; it is rather expected that in December 2019 nearly 80 kt will flow into China from dispatched nickel ore, similarly to what was experienced in 2014, after the first export ban.
Nevertheless, production will be limited as there is a remarkable drop in feed supply to Chinese NPI smelters.
- Other potential suppliers of nickel ore
Ms. Zhang notes that Philippines can be regarded as the main potential source of additional ore. Indeed, Philippines significantly raised its exports to China, in 2014 when the first ore export ban was established, due to the increased production from mines in the Autonomous Region in Muslim Mindanao (ARMM); mainly Tawi-Tawi.
In fact, in 2018, Tawi-Tawi shipped almost 96 kt Ni in ore to China, while year-to-date data indicate similar levels to be experienced in 2019. From 2020 onwards, Philippine exports are expected to to remain at 295 kt, excluding the Tawi-Tawi region.
Moreover, other ore-exporting countries include New Caledonia, along with Guatemala, Turkey and Albania; yet, they are smaller suppliers. For instance, in 2018, New Caledonia has increased its exports from 1.57 Mwt to 4 Mwt.
A higher price in ore could potentially encourage miners across these countries to increase production, and taking into account each individual mine’s optimal production record in the past five years this could add an upside potential of around 200 kt. Nevertheless it is added that already existing legislative and environmental restrictions make this scenario unlikely.
Wood Mackenzie note that mine production in the Philippines and other ore-exporting countries can not increase to a level that could potentially balance out the forthcoming loss from Indonesia.
- The impact on Chinese NPI production
In 2019, the Chinese NPI production is not expected to be disrupted by the ore ban, as Wood Mackenzie maintain their forecast at 570 kt Ni. Nevertheless, cutbacks are expected to be seen in Chinese NPI production from H2 2020, even though current ore stockpiles may provide a 'temporary cushion'.
On the other hand, it is noted that in 2019, the Indonesian NPI output is about to achieve a 36% year-on year-growth, reaching 360 kt Ni, as the Chinese NPI production declines and the Indonesian NPI is ramping up.
In September, the Swedish P&I Club said the mandatory notification requirements for the carriage of nickel ore loaded in Philippines and Indonesia still applies, amid an increased discussion surrounding the safe carriage of nickel ore cargoes. Nickel ore is a cargo which may liquefy if the moisture content of the material exceeds its Transportable Moisture Limit (TML), which can lead a vessel to lose stability.