Nickel-Ore Supply in China Seen Lasting 5 More Months on Ban

Mar 31, 2014 4:38 am ET

(Updates price in sixth paragraph.)

March 31 (Bloomberg) -- Nickel ore inventory in China, the world’s biggest metals consumer, could sustain production of a cheaper substitute for the refined metal for as much as five months, according to a survey by Bloomberg News.

Stockpiles at ports and warehouses held by traders and factories are at about 29 million metric tons, little changed from the start of the year and enough for nickel pig iron makers to produce through August, according to the average of seven estimates from Chinese smelters, miners, traders and analysts.

Nickel on the London Metal Exchange entered a bull market this month on speculation that Russian supply will be disrupted at a time when shipments are blocked from Indonesia, the world’s biggest miner of the commodity. Last year’s worst performer among industrial metals on the LME is this year’s best, gaining 14 percent and on track for the first annual gain since 2010.

“Ore consumption will accelerate as factories are streaming back,” said Celia Wang, a nickel analyst with Beijing Antaike Information Development Co. “Stockpiles didn’t drop much from the start of this year because imports surged in January ahead of the ban and production slowed in February during the Chinese New Year Holidays.”

China’s imports of nickel ore from Indonesia rose by 21 percent to 6.12 million tons last month from December as cargoes that left port before a Jan. 12 ban were delivered to smelters building stockpiles.

The metal, used in corrosion resistance in stainless steel, for delivery in three months on the LME climbed 0.9 percent to $15,850 a ton at 4:32 p.m. in Shanghai.

Higher Price

Laterite ore with nickel content of about 1.9 percent was offered at about $70 a wet ton in northern China, compared with about $45 in mid-February, said Zhao Qiannan, a Shanghai-based nickel market analyst at consultancy

With ore prices rising and the Indonesian ban still in place, traders aren’t looking to offload any of their inventory on the expectation that prices will climb further, Ivan Szpakowski an analyst at Citigroup Inc., said in a note March 27. “As a result, small NPI producers should continue to be forced out of the market as their own inventories are used up.”

Inventories at ports, which are ready to supply small-sized plants running out stocks next month, are at 22 million tons, according to the survey conducted last week.

China’s NPI output is expected to fall 21 percent to about 380,000 tons this year as the Indonesian ban curbs raw material supplies, according to Antaike’s Wang. She previously estimated about 500,000 tons.

China probably received its final nickel ore shipments from Indonesia last month as long as the ban remains, Wang said.

Only about 400,000 tons of the 3.1 million tons of February nickel ore imports from Indonesia were for use by NPI producers, with the remainder used for its iron content, according to Citigroup’s Szpakowski.