China, Japan Scramble for Nickel After Indonesian Ore Export Ban
Stockpiles of nickel in some countries are sufficient in the short term, but long-term supply may be a concern. (Reuters Photo/Yusuf Ahmad)
The price of nickel ore from the Philippines has more than doubled since late February, as supplies have dried up from rival producer Indonesia, previously the world’s biggest exporter.
China, the world’s largest nickel consumer, has recently increased imports of refined metal to help meet higher seasonal demand, say trader and importers, as the price of commonly used alternative nickel pig iron has soared since the Indonesian ban took effect in mid-January.
Nickel demand may get a further boost from stockpiling by China, with refined imports due to start arriving at State Reserves Bureau warehouses before the end of June, sources with knowledge of the matter said.
“Everybody in China is bullish nickel and everybody is hoarding nickel of any kind,” commodities strategist Ivan Szpakowski of Citi in Shanghai said.
China, the world’s largest steelmaker, has turned to laterite nickel ores in recent years to produce nickel pig iron, a cheap, low-grade ferronickel — an alloy of iron and nickel — used in stainless steel.
Japanese stainless steelmakers rely mainly on ferronickel producers and scrap for content, while other steelmakers use refined nickel for speciality products.
Nickel users and traders in both countries built up substantial stockpiles of ore ahead of the Indonesian ban that should last major users until the end of the year, say traders and industry watchers, but long-term supply is an issue.
Prices fly
Spot Philippine ores with 1.9 percent metal content rose more than 120 percent between late February and end-April, trading at $114 per wet metric ton CIF China last week, traders said.
“Spot ore prices have soared this year as we compete with Chinese makers to secure the Philippine ores,” said a senior official at Japanese ferronickel and stainless steel maker Nippon Yakin Kogyo.
The price of nickel pig iron with 10 percent to 15 percent metal content has risen about 20 percent since early March to about 1,350 yuan ($217) per 1 percent of metal.
This makes it more expensive than spot refined nickel prices in China, which have risen nearly 40 percent this year to about 131,750 yuan per ton.
“We are expecting 1,400 yuan soon,” said a manager at a nickel pig iron producer. Traders said some producers were suspending monthly deliveries to stainless steel mills, who were resisting price hikes.
Some Chinese mills were switching to refined nickel and were likely to lift purchases, said Wang Lixin, an analyst at Umetal.com in China, which monitors ore imports, although this would be gradual as mills needed to make small adjustments to production facilities.
An executive at a large trading and investment firm in Shanghai, who declined to be named, said the group had bought 2,000 tons of benchmark three-month LME nickel back in April at $16,000 to $17,000 per ton.
Demand for spot refined nickel had also been increasing due to stronger seasonal consumption, the executive said, although a probe into the use of iron ore for financing may curb imports by small trading firms.
In Japan, ferronickel producers who supply the steel industry are seeking longer-term supply ore contacts from Philippine miners, concerned about the possibility of a supply shortage next year, the Nippon Yakin Kogyo official said.
An executive at another ferronickel maker in Japan said it was negotiating with Philippine miners to try to revise existing three- and six-month contracts into longer five-year contracts.
Japan’s top makers such as Pacific Metals and Sumitomo Metal Mining have also boosted procurement of nickel ore from New Caledonia.
Reuters
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