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There's No Stopping Nickel!

Expectations of booming demand for electric vehicles have bolstered the longer term bull case for nickel, and a likely supply crunch.  Nickel is now up 65% since the start of the year, hitting $18,000 a tonne this week, its highest level since September 2014.

Indonesia’s mine minister has followed through on recent threats to expedite the reinstatement of a ban on unprocessed ore exports first mooted for 2022. Indonesia will stop nickel ore exports from 1st January 2020 – two years earlier than initially flagged - as it speeds up efforts to process more of its resources at home.

Bambang Gatot Ariyono, the mining ministry's director general for coal and minerals, said the ban will be applicable to all grades of nickel ore and ordered exporters to stop shipments from that date regardless of standing contracts. "That is why we are announcing now so they have four months of transition time," Ariyono told reporters.

Goldman Sachs has raised its 12-month price outlook from $16,000 to $22,000 per tonne, on the back of supply-side issues. The International Nickel Study Group highlights that the market was in a deficit of 146,000t last year, with an 84,000t gap expected this year - but this could grow.

With Indonesia’s export ban being brought forward, a much larger than anticipated deficit for next year may be looming, with about 10% of global supply expected to be removed. The deficit comes at a time when stockpiles on the London Metal Exchange represent only two months’ supply – hovering around 150,000t since July.

China’s nickel pig iron production fed from Indonesian and Philippine mines dominate the global industry, and despite the economic slowdown in China, which imports some 50% of the world’s nickel, stainless steel production is growing rapidly.

The situation has been made worse after the mines ministry of Papua New Guinea said the Ramu nickel processing plant owned by China’s MCC Group that spilled mine waste into Basamuk Bay, may face closure. The Ramu operation produces approximately 35,000 tonnes of nickel, equivalent to 23% of the metal held in LME inventories.

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