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The global nickel market could swing to a
surprise deficit this year if growth in Indonesian output is constrained by
slow mining permit approvals, according to Macquarie Group Ltd.
While the bank’s base case is for a surplus
of less than 40,000 tons, that may be in jeopardy if Jakarta’s approvals are
slow and full-year growth in local production dips below 13%, analysts
including Jim Lennon said in a note. “This is a major change from our recent
forecasts,” they wrote.
Benchmark nickel prices collapsed by 45%
last year, driven by massive growth in supply from the Southeast Asian nation,
which outstripped faltering demand from the stainless steel and battery
industries. Still, permit approvals in Indonesia this year — without which
producers may not operate — have been tardy, prompting the government to pledge
that they’ll be cleared this month.
Outside Indonesia, stockpiles built up
within China last year may also have been smaller than previously estimated
given a bigger-than-projected increase in its consumption, the analysts said,
citing field research. As a result, the market appears to be closer to balance
than previously assessed, they said.
Nickel ore in Indonesia has been trading at
a more-than-$7 a ton premium to the government-set minimum selling price,
Macquarie said. That would add about $700 a ton to production costs in the
country, the bank estimates.
That would present significant relief to
miners and smelters elsewhere, with many weighing shutdowns as Indonesia’s
massive low-cost production makes them uncompetitive. Septian Hario Seto, the
government official who has overseen the country’s nickel-processing boom, said
prices are unlikely to rise much above $18,000 a ton on the London Metal
Exchange.
Three-month nickel futures fell 1.7% to
$17,585 a ton as of 3:45 p.m. on the LME in London, after climbing 10% last
month amid the Indonesian permitting delays. Other metals rose, with copper and
aluminum up 0.2%.