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Please see the conclusion of this note for recent changes in the expectation of supply-side dynamics in the base metal complex.

Indonesia’s move to ban the exporting of unprocessed minerals in January has undoubtedly helped propel nickel prices +~40% YTD:

  • Indonesia previously the largest exporter of nickel ore
  • Decrease of ~$3Bn in annual exports
  • Indonesia previously accounted for 1/5th of global supply (largest producer)
  • China and Japan were two largest buyers:
    • China consumed 47% of nickel produced globally in 2013

The Indonesian government has no plans to lift its ban of unprocessed nickel ore. Jakarta believes producing, refining, and smelting domestically will be much more lucrative moving forward. Miners have now been forced to develop this capacity:

A report from Indonesia’s Investment Coordinating Board indicates they are in fact investing in the second-leg of the production process:

  • $8Bn spent to build three alumina refineries and two ferronickel projects
  • 102 Nickel Smelters in the process of being constructed

On August 28th we published a note outlining the new exemptions created for the exporting of unprocessed copper bauxite, but Jakarta doesn’t appear willing to move in the same direction for nickel:

Is Indonesia's Export Ban on Copper Bauxite Nearing Resolution?

With the Nickel Ore supply from Indonesia cut-off, both China and Japan were forced to turn elsewhere for raw minerals:

  • Chinese imports of nickel ore from the Philippines have more than tripled since Indonesia’s ban
  • The Philippines is now the LARGEST Nickel Ore supplier to China
  • THE Philippines has supplied 61% of China’s unprocessed nickel ore for pig-iron production YTD; iron ore can also be used
  • Pig iron a common ferrous metal used by the steel and metal casting industries  

On August 27th the Philippine House Natural Resource Committee proposed a bill to ban raw mineral exports following Indonesia’s move in January. The logic for the proposal echoes Jakarta’s reasoning in that building the infrastructure for the domestic capacity for the second-leg of the production process is a more lucrative venture than just exporting the raw mineral itself.

Congressman Erlpe John Amante estimated Indonesia’s revenue from exports would triple if miners were forced to refine the raw minerals (implement this second stage of the production process).  

The speculation fueled heavy buying late last week:

Thursday (09/04): +2.85%

Friday (09/05):    +1.67% on volumes +34/51/46% above 1/3/6-month averages

Monday (09/08): +92bps on volumes +26/39/34% above 1/3/6-month averages

The market pulled back significantly late in the day London time after a statement from Jakarta (-4.9% in late trading):

  • Philippine congressman Erlpe John Amante stated today that a mineral ban may not actually be in place for an estimated 7 years
  • 2 years before proposed bill is put into law
  • 5 Year reasonable grace period for miners to adapt


  • Indonesia moved to pass the bill in 2009 which gave the government the POWER to implement the ban which
  • Most miners wrongfully assumed the bill would not be signed into law
  • The move in January forced the necessary cap-ex and infrastructure spending. As mentioned above, this is now happening with the 102 Nickel smelters now being developed across Indonesia



1)      QUANT: The quant set-up is the most bullish of all commodities in TACRM, and we will continue to manage the risk of the range with a bullish intermediate-term TREND bias on the China catalyst.


2)      LONG-TERM: Late cycle cap-ex spend from miners will continue bringing an increasing supply of copper, nickel, and iron ore that will have to be met with a sustained increase in demand (China in particular).




  • The implementation of a nickel ore export ban from the Philippine government appears less threatening on the margin over the next several years
  • Chinese coal imports hit 18-month low in August (China consumes 1/4th of coal globally)
  • Chinese iron ore Imports from Port Hedland, Australia reach a record 32M tons in August in as BHP and Rio Tinto increasing production
  • Indonesia lifts the ban of unprocessed copper ore bauxite:
    • A shipment of 10,000 tons of copper concentrate left Indonesia for China on Aug. 8
    • Meanwhile more of a push elsewhere to diversify supply lines:
      • China’s MMG closed on a $7Bn acquisition of the Las Bambas copper project in Peru in July
      • Chinese backers are now behind one-third of all Peru’s new mining investments by value

 Please feel free to ping us with questions or additional color. 

  NICKEL: A Ban on Unprocessed Nickel Ore from the Philippines Looks Several Years Away - TACRM Table

Ben Ryan