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Nickel smelters in top producer Indonesia
are making rare purchases of ore from the Philippines to ease tight supplies,
people familiar with the matter said, upending trade flows of the raw material
and pushing up costs across the supply chain.
Jakarta recently delayed the issuing of
mining quotas and suspended operations at a key site of state miner Aneka
Tambang (ANTM.JK) (Antam) after an investigation into corrupt practices in
issuing mining allowances.
While mining at other sites continues and
Indonesia, which accounts for half of global mined supply, has said there is no
shortage of ore, prices have risen about 8% this week, following a 10% surge a
week earlier, local buyers say.
Some firms are now buying ore from
neighbouring Philippines, the world's No. 2 supplier, in the event that new
mining quotas are further delayed, said three smelter managers, two nickel
traders and a Chinese analyst.
All declined to be identified because they
were not permitted to disclose the trade information publicly.
"(We) started imports from this month.
It is economical," said an official at a major smelter in Indonesia.
The person did not specify how much the
smelter is buying but said the purchases are of low-grade limonite ore.
Indonesian miners will prioritise
high-grade ore for their limited production quotas, the person added.
Indonesia imported 53,864 metric tons of
nickel ore in the first half of 2023, up from 22,503 tons for all of 2022,
Indonesian trade data showed.
But imports from the Philippines only
started in May, and all arrived at Morowali port in a huge nickel processing
park run partly by Chinese nickel giant Tsingshan Group, the Indonesian data
showed.
Tsingshan did not respond to a call and
email seeking comment.
Volumes in the first half from the
Philippines were less than 1,000 tons in nickel content compared to Indonesia's
1.6 million tons mined last year, data from the Indonesian government and the
International Nickel Study Group (INSG) showed.
"The ore from the Philippines is
generally lower grade than Indonesian material which will push operating costs
higher due to lower production from same tonnage of ore," said Wood
Mackenzie analyst Andrew Mitchell.
"But the ore is cheaper by comparison
with domestic ore currently and so this will offset some of the rising
costs," Mitchell said.
Indonesia exported much of its ore before a
2020 ban halted all shipments and attracted billions of dollars worth of
investment in nickel smelting, mostly from Chinese companies.
Imports from the Philippines could rise to
100,000 tons for July and August combined because of the supply tightness,
according to Chinese consultancy Mysteel.
The Philippines mined 360,000 tons of
nickel in ore in 2022, or 11% of global supplies, according to INSG.
Rising demand for ore from the Philippines
is also pushing up prices in China, as buyers stock up due to tighter
Indonesian supplies and ahead of the rainy season in the Philippines starting
in October, said a Chinese trader.
Philippines 1.3% grade ore landed at
China's Lianyun port surged 20.6% in the past month to $41 a ton, the highest
since March, Mysteel data showed.