The global nickel price fluctuated quite strongly in 2019. At the end of the first week of December, the global nickel price averaged US$13,964 per ton, up slightly from $13,186 recorded in 2018.
It is worth noting that the difference between the highest and lowest nickel prices this year was wider than last year. While the low was similar to the 2018 figure, the nickel price this year jumped to a high of $18,060 per ton, significantly higher than the 2018 peak of $15,750.
This surge is connected to the Indonesian government’s move to bring forward a planned nickel ore export ban from 2022 to 2020.
Even though the ore export ban has a negative impact on nickel miners, as it limits their market, the policy has proven to bring investment and can improve the nickel industry’s export performance.
Since the implementation of Law No. 4 on mineral and coal mining in 2014, 22 nickel processing facilities have begun operating to turn domestic nickel ore into intermediate products.
If running at 100 percent of their capacity utilization rate, those smelters would need 39.5 million tons of nickel ore per year. According to the Energy and Mineral Resources Ministry, the number of nickel smelters in operation will reach 41 by 2021 with the total potential nickel ore absorption to reach 96 million tons per year.
In line with the construction of nickel smelters, Indonesia’s exports of nickel products has increased sharply.
The country’s nickel products export value totaled $6.03 billion during the period of 2014 to 2018, doubled the amount of 2013, when ore shipments dominated nickel product exports. Indonesia was able to increase the volume of its ferronickel exports from 83,700 tons in 2013 to 857,500 tons in 2018.
In addition, Indonesia’s export of stainless steel also skyrocketed during the period as the volume increased from 50,500 tons in 2014 to 1.9 million tons in 2018. Owing to these export achievements, Indonesia has become the world’s biggest ferronickel exporter and third-largest stainless steel for flat product category exporter.
Looking ahead, the prospects of Indonesia’s nickel industry are expected to improve further. The market expects the global nickel price to move higher.
This reflects in the nickel futures market for December 2020 deliveries, where the price is $13,518, higher than the current spot price of $13,475.
Likewise, analysts’ expectations that reflected in a Bloomberg Consensus Forecast on the nickel price point to a positive projection for 2020.
They forecast the nickel price reaching $15.593 per ton next year, much higher than the average price of $13,964 so far this year.
This higher nickel price projection is related to global supply and demand expectations in 2020, with the latter likely to increase, especially from the stainless steel industry.
The stainless steel industry still dominates global nickel demand with a market share of 71 percent. According to MEPS International, global stainless steel production in 2020 will reach 54.2 million tons, increasing 4 percent from the estimates of aggregate production for 2019 of 52.1 million tons.
Apart from the stainless steel industry, future demand for nickel will be driven by the growth of the battery industry in line with the increase of electric cars sales.
At the time, nickel demand from the battery industry is still relatively small, accounting for only 3 percent of global nickel demand. However, the figure is expected to go up in the future.
According to Bloomberg Intelligence, global electric vehicle sales are going to increase to 28.3 million units in 2030, growing 24.2 percent annually.
In line with the increase in global electric vehicle sales, nickel demand for the industry will reach 921,000 tons in 2030, or up 29.6 percent annually. The share of the battery industry in global nickel demand in 2030 is predicted to increase to 37 percent from only 3 percent this year.
Although the prospects of the nickel industry in the future are encouraging, there are several risk factors for the domestic nickel industry’s survival in the long run.
With a sufficient number of smelter developments, the amount of nickel ore reserves available to meet those smelters’ demand for raw materials must be carefully calculated. According to the Energy and Mineral Resources Ministry, Indonesia’s current nickel reserves are only 698 million tons.
Assuming all smelters will be constructed in 2021, they will consume 96 million tons of nickel ore annually.
Therefore, current proven reserves of nickel will only be sufficient for seven years.
However, there are estimated reserves of around 2.8 billion tons that still require exploration. Factors like license procurement processes, easy access to mines and reasonable economical scale will play a major role in the efforts.
Therefore, the government must continue to support nickel exploration activities in the future, so that the amount of nickel reserves can increase and the sustainability of the domestic smelter operations can last even longer.
Source: Adjie Harisandi / The Jakarta Post
11 December 2019