This week Indonesia announced a ban, to start in the new year, on the export of nickel ore. While it will disrupt supply chains and freight demand, it is not a unique event, with a similar ban put in place in 2014, something brokers Braemar ACM noted in a recent release which saw a short-lived but profitable spike in freight rates as producers boosted trade to beat the restriction. The surging nickel price at the moment would suggest another surge is likely before year-end.
The new restriction on the export of low grade nickel ore – export of high grade material is already prohibited – brings forward to January 1 2020 a ban that was already scheduled for 2022. It is expected to take 2m tonnes of supramax cargoes out of the market next year.
“With Indonesia’s withdrawal from the market, China, the major buyer, will look to its other suppliers for additional material. It is not clear if the Philippines will be able to expand output; it doubled volumes from 2011-2013 in the runup to the first ban, and has maintained sales since then, but its trade is very seasonal. With this in mind, it is little wonder that the nickel price has bucked the trend of many other commodities over recent months to hit new five-year highs, with analysts expecting a nickel deficit to open up,” Braemar ACM noted.
