On August 30, the Indonesian Ministry of Energy and Minerals Resources (ESDM) officially announced a ban on nickel ore exports starting January 1, 2020. This is two years ahead of the planned date of January 1, 2022, that was put in place following the relaxation of a previous ore export ban in 2017. The move has serious implications for nickel supply, particularly in China, but also in Indonesia.
According to Wood Mackenzie (Woodmac), Indonesian nickel ore exports through June total 12.3 million wet metric tons (wmt). Assuming a grade of 1.7% nickel, this equates to around 140,000 mt of nickel. The bulk of which was exported to China. Indonesia currently has 36.7 million wmt of export permits in place, according to Woodmac. Of these, 8.6 million wmt expire at the end of September, and a total of 18 million wmt expire by the end of 2019.
If all the available permitted quotas were used in 2019, then, in theory, Chinese imports could reach 400,000 mt of nickel by the end of the year. Given the ban on ore exports now being imposed by year end, it is highly likely that export tonnages will rise significantly between now and December, according to Woodmac.
Some of the losses could be made up elsewhere. New Caledonia is ramping up its exports to 4 million wmt from 1.6 million wmt in 2018. In 2014, when the initial ore export ban was put in place, the Philippines raised ore exports to China from 29.6 million mt (dry basis) in 2013 to 36.4 milion mt in 2014 and 34.3 million mt in 2015. Since that time, imports into China have averaged around 30 million mt.
For 2019, there will be no impact on Chinese nickel pig iron (NPI) production and Wodmac is forecasting 570,000 mt of nickel in NPI. For 2020, the producers with export licenses will endeavor to export as much material as possible before year end. On this basis, up to a further 260,000 mt of nickel in ore could arrive in China before the ban comes into force.
So, assuming the supply of 275,000 mt from the Philippines, 400,000 mt from Indonesia and 20,000 mt from New Caledonia, plus a another 5,000 mt from other sources, total nickel-in-ore feed for 2019 could reach 700,000 mt, equivalent to around 630,000 mt Ni in NPI. Based on Woodmac’s forecast for 570,000 mt for the year, this would leave enough nickel in ore in 2020 to produce around 60,000 mt of nickel. Combining with the 300,000 mt detailed above of ongoing feed would suggest a production rate of 360,000 mt of nickel in 2020.
Woodmac estimates the total loss in nickel production because of the ore export ban to be 16,000 mt in 2020, 190,000 mt in 2021, 112,000 mt for 2022 and 85,000 mt from 2023 onward. However, there are smelter projects planned in Indonesia, as well as latent capacity that was idled due to low nickel prices and high coke prices, that in theory could come back into production.
In theory, Indonesia could offset the loss in NPI production in China, according to Woodmac. In reality, the capacity expansion is likely to be slow based on past performance. Being able to offset the total production loss estimated for 2021 is unlikely.