Chinese nickel pig iron producers are aiming to get around an Indonesian ban on nickel ore exports by buying a shipment of slightly lower grade material and labelling it as "iron ore", two Chinese industry sources said.
Market talk of the move at a time of weak seasonal demand has curbed Chinese buying of nickel ores from rival supplier the Philippines, traders said, and helped depress ore prices that have already fallen from record levels in May.
"The sign of a supply rise from Indonesia has helped push down nickel ore prices," said a source with direct knowledge of the shipment at a Chinese nickel pig iron maker, whose firm imported Indonesian ores before the ban.
China imported 6.1 million tonnes of nickel ore in January 2014 from Indonesia, which banned ore departing from mid-January, part of a move to force miners to build processing plants and smelters within the Southeast Asian nation.
China, the world's top consumer of nickel, used Indonesia's laterite ores to produce nickel pig iron, a low-grade ferro-nickel used in making stainless steel.
Importers stockpiled material ahead of the ban and turned to the Philippines for alternative supplies, while the price of nickel ore soared after it took effect.
The two trading sources said Chinese importers had now bought ore with low nickel and high iron content, and were labelling it as "iron ore" for export. The first such shipment was set to leave for China this week, they said. They did not disclose the identity of the buyers.
The ores have about 1.5 percent nickel content and more than 50 percent iron content, said one of the sources, who had direct knowledge of the shipment. That compares with 1.9 precent to 2 percent nickel and around 40 percent iron content in most previous Indonesian laterite nickel ore exports to China.
Benchmark iron ore in the international market contains 62 percent metal content .IO62-CNI=SI. Indonesia's regulations allow lateritic ore to be exported as long as it contains 51 percent iron.
Xu Aidong, a senior analyst at state-backed research firm Antaike, said the shipment could have a big impact on nickel ore prices in the second half if it was followed by similar exports.
Philippine laterite nickel ores with 1.9 percent metal content this week were offered at $105 per wet tonne, cost, insurance and freight, down from a record about $150 in mid-May, traders said. Ores with 1.5 percent nickel traded below $60, in a free-on-board basis, from about $90 in May, traders said.
Prices have fallen sharply due to weak demand as some nickel pig iron producers have cut output or closed temporarily due to weak seasonal demand for stainless steel products, producer sources and analysts said.
A senior executive at a nickel pig iron plant in China's eastern province of Zhejiang said the firm was currently operating at 35 percent of its capacity.
The nickel ore ban appears to having some effect on spurring the construction of processing plants within Indonesia. At least one smelter is under construction and equipment for two others has been shipped from China to Indonesia, industry sources have told Reuters.
source: reuters |
