Yoga Rusmana, Eko Listlyorini Phoebe Sedgman
Indonesia’s ban on ore exports will remain in place under the next government as the curbs spur as much as $18 billion in investment in processing plants by 2017, according to the Energy and Mineral Resources Ministry.
Mostly Chinese investors are planning at least 64 facilities to process nickel, bauxite and other metals, R. Sukhyar, the ministry’s director general for minerals and coal, said in an interview. Investments reached $4.9 billion so far this year, said Sukhyar, who is expected to keep his post in the new administration.
Nickel is the second-biggest gainer among commodities this year after the largest mined producer barred ore exports to compel investments in local processing. The maintenance of the ban after presidential elections last month is pivotal to predictions for further price increases from banks including BNP Paribas. Joko Widodo, the Jakarta governor elected to succeed President Susilo Bambang Yudhoyono, and Prabowo Subianto, who challenged the result, say they will keep the ban, Sukhyar said.
"If s important to maintain the policy," Sukhyar said in Jakarta on Monday. "Investors have made it clear to the government that they don’t want any change in policy because it could damage all their investments and they would lose trust."
Yudhoyono prohibited ore exports from Southeast Asia’s largest economy in January in a wager that investment and higher prices would more than offset job cuts and lost revenue from unprocessed shipments over time. The curb will shift the global nickel market into a deficit next year for the first time since 2010, according to Morgan Stanley.
Nickel, used to make stainless steel, rallied as much as 56 percent this year to $21,625 a metric ton in May. Futures traded 02 percent higher at $18,788 a ton on the London Metal Exchange at 603 am on Wednesday, climbing for a third day. The price will stay above $18,000 this year, Sukhyar said.
"When the ban was first brought in, people were a bit skeptical that it possibly wouldn’t last that long," James Glenn, an economist at National Australia Bank, said on Wednesday. "It’s definitely become clear that this is something that’s going to be in place for a while to come."
A jump to $25,000 is plausible, according to Stephen Briggs, a metal strategist at BNP Paribas in London, whose outlook was conditional on the maintenance of the baa Nickel was listed by Societe Generale among its top picks for this half as the curb was seen moving the market to shortages.
Joko and Prabowo "shared the same view and acknowledged the importance of value-added processing and for us not to export raw materials anymore," said Sukhyar, who was appointed to his post in December and has been working at the ministry since 1979.
Yudhoyonos term ends in October.
Jusuf Kali a, Joko’s running mate, said in June during the contest for votes that they would keep the ban, a stance that was further supported by .campaign documents. Prabowo would retain the ban should he become president, his brother and financial adviser, Hashim Djojohadikusumo, said on June 6.
Investors will build 30 nickel smelters that will process about 20 million tons of ore when all of them start production in 2017, Sukhyar said. Before the ban, most unprocessed nickel ore was shipped direct to China to make nickel pig iron, a cheaper substitute for the refined metal.
Nickel demand will outstrip supply by 97,100 tons in 2015, according to Morgan Stanley, while Goldman Sachs sees a 200,000 ton deficit next year. The ban will cut mined output in Indonesia to 8.9 percent of supply from mines in 2015 from 29 percent last year, Morgan Stanley said in a July 8 report.
"You can expect to see the market move more into a reasonably significant deficit toward the end of this year and into next year," Glenn said. That’s going to see renewed support for die nickel price.” Bloomberg
Source : JakartaGlobe, August 14, 2014