Nickel Seen by Macquarie Swinging to Deficit in 2015 on Ore Ban

Jan 13, 2014 11:43 pm ET

Jan. 14 (Bloomberg) -- The global nickel market may swing into a deficit next year as Indonesia’s ore export ban will constrain production of nickel pig iron, a lower-grade alternative to refined metal, said Macquarie Group Ltd.

A surplus may narrow to 35,000 metric tons in 2014 from 150,000 tons in 2013 as NPI output falls 1.5 percent to 475,000 tons, analysts including Jim Lennon said in a report today.

The bank joins Barclays Plc predicting that the rule, which took effect Jan. 12, may push the market into supply shortages in 2015. Indonesia, the biggest mined nickel producer, accounts for 18 percent to 20 percent of global nickel supply, Goldman Sachs Group Inc. estimates. The metal may reach $17,000 a ton this quarter, according to Citigroup Inc. That would mean a 19 percent gain from the current price.

We assume that stocks are adequate to sustain production in 2014, the Macquarie analysts said in the research note. For 2015, the market will swing into a deficit assuming that NPI production starts to get constrained.

Nickel for delivery in three months on the London Metal Exchange rose as much as 0.4 percent to $14,260 a ton, the highest since Dec. 30, and was at $14,258 at 11:58 a.m. in Shanghai. The metal, used in corrosion resistance in stainless steel, has climbed 2.6 percent this month, the most among the six base metals on the LME. Prices slumped 19 percent in 2013.

Global output will exceed demand by 41,000 tons this year, narrowing from a 181,000-ton surplus in 2013, while the ban may push the global market into deficit in 2015, said Barclays analysts including Gayle Berry this week.

Lower Grade

Chinese NPI accounts for about 25 percent of world supply of 1.92 million tons last year, Macquarie said today. Nickel ore stockpiles in China are estimated at 32 million tons, large enough for one year’s worth of demand, it said.

China’s NPI production growth may slow this year because of the Indonesian restriction, with output forecast at about 500,000 tons in 2014, according to Celia Wang, an analyst at Beijing Antaike Information Development Co. The total last year was 481,000 tons, compared with 360,000 tons in 2012.

Indonesia, Southeast Asia’s largest economy, supplies more than half of China’s nickel ore imports, data from the customs office in Beijing show.

--Alfred Cang. Editors: Sungwoo Park, Jarrett Banks