Indonesia controls more of the world's supply of nickel than Opec did of oil at the cartel's peak in the 1970s of a critical metal
In 2014 the Indonesian government took the drastic step of announcing a ban on all exports of raw nickel.
The decision encouraged Chinese companies to spend billions of dollars to set up processing plants in Bahodopi and across other parts of the country of 281 million.
The transformation has been a remarkable turnaround for a country that a decade ago was not even a major player in nickel. Although Indonesia held the world's largest reserves — about 55mn tonnes as of 2024, according to the US Geological Survey — most of it was low-grade nickel that it had not yet figured out how to process efficiently.
With the help of Chinese technology, huge investments from Beijing and a dose of protectionism, Indonesia has gained control of the market and cemented itself as the epicentre of global nickel production for years to come.
Last year, Indonesia accounted for 61% of the global refined nickel supply up from just 6 per cent in 2015, according to Macquarie, the Australian bank and asset manager. Its market share is expected to grow to 74% by 2028.
This means Indonesia now controls more of the world's supply of nickel than Opec did of oil at the cartel's peak in the 1970s — then around half of global crude oil output.
"Over 10 to 15 per cent of the rest of the world has gone out of business," says Lennon. According to his estimates, Indonesian production rose by 1.5mn tonnes between 2020 and 2024, while the rest of the world fell by 500,000 tonnes.
Flooding of the market with cheap Indonesian nickel has brought the price to levels where most producers elsewhere cannot make any money.
Indonesian officials have recently said they would be comfortable with nickel prices at $18,000-$19,000 per tonne — higher than current levels but still not enough to make nickel production profitable for others.
Prices would have to stay above $22,000 per tonne over a considerable period of time for mines outside Indonesia to restart, says Mark Selby, chief executive of the Canada Nickel Company.
The recent comments on reducing mining quotas also create uncertainties that could also push buyers to look for alternatives to nickel. Carmakers, for instance, could move to nickel-free options such as lithium iron phosphate (LFP) batteries, which are already seeing a significant increase in demand in China.
"It's a very dangerous game to be playing . . . to create the perception that you could cut off supply," says Macquarie's Lennon.
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