Indonesia suspended exports of nickel ore with immediate effect after a planned ban on shipments from the beginning of next year led to a rush to beat the deadline.
The mineral meant for exports during the rest of the year will be absorbed by domestic companies with smelters, Indonesia’s Investment Coordinating Board Chairman Bahlil Lahadalia told reporters in Jakarta on Monday. The government and nickel miners association agreed to halt exports immediately and there won’t be any notification issued in this regard, he said.
Nickel rose as much as 1.2% to reach $16,980 a ton on the London Metal Exchange after the news. Prices peaked at $18,060 in early September immediately after Indonesia first announced plans to expedite the ore ban. Shares of nickel producers also rallied on the news with MMC Norilsk Nickel PJSC jumping as much as 7%.
Indonesian companies with outstanding export contracts will need to find ways to avoid possible penalties, Lahadalia said. Local smelters can buy ore committed for shipments at prices prevailing in China after deducting taxes and shipment costs, he said.
China’s imports of nickel ore rose to a five-year high in September, suggesting that users there were in rush to secure material. Almost all of Indonesia’s nickel ore goes to China.
The move to halt nickel ore exports is in line with President Joko Widodo’s plan to turn Indonesia into a processor of its mineral resources than a mere supplier of raw materials. In August, the government brought forward a planned ban on exports of nickel ore by two years to the start of January, potentially removing millions of tons of supply from the market and threatening a global shortage.
Widodo’s government has already said it intends to follow its ban on nickel ore exports with similar steps for other minerals such as bauxite and copper concentrate. The curbs are seen accelerating investments of $20 billion in smelters, stainless steel plants and electric battery units.
Indonesia has about 14 nickel smelters and another 27 under construction, according to the Indonesia Smelter Enterprises Association. The smelters in PT Indonesia Morowali Industrial Park and those owned by PT Virtue Dragon Nickel Industry may have a combined input capacity of 40 million tons annually, according to Alexander Barus, chief executive of the Morowali park.