Nickel prices plummeted almost 5%, hitting a fourth-month low Thursday after Indonesia decided to finally relax its ban on partially processed minerals exports, including nickel ore, bauxite and other minerals concentrates under certain conditions.
The export ban, in place since 2014, aimed to push miners to build smelters and so process ore locally. The ruling did allow, however, some concentrate exports to continue amid protests from the industry.
The biggest winner will be China, as Indonesia was its main supplier of nickel ore and bauxite before the controversial ban was imposed three years ago.The new legislation introduced today, reports Reuters, modifies cover areas and permit extensions, which now may last up to five years. It also changes conditions for divestment and extends a temporary deal to allow the export of copper concentrate.
Miners will be able to export ore as long as they show progress toward building smelters in a five-year period. They eventually will have to set aside at least 30% of their smelter capacity to process low-grade ore, defined as material with less than 1.7% of nickel content and below 42% aluminum.
Prices for nickel fell on the London Metal Exchange to its lowest since mid September at $9,660 a tonne on the news, and was at $10,000 a tonne in official midday trading, down 1.8%
Indonesia's decision brings both good news and fresh challenges to companies operating in the country, which include Phoenix-based Freeport-McMoRan Copper & Gold (NYSE:FCX), the operator of Grasberg, the world's fourth largest copper mine.
While the company now has a window to continue copper concentrate exports, it will also have to sell up to 51% of its local unit from 30% required under present laws, according to Reuters.
The biggest winner will be China, as Indonesia was its main supplier of nickel ore and bauxite before the controversial ban was imposed three years ago.