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Have nickel prices bottomed out?

Stainless Monthly Metals Index (MMIIt fell by 8.87% from June to July. After Nickel prices Having hit a bottom in mid-July, they followed the base metal’s trend upwards. However, by early August, the rebound faltered and prices resumed their base.

Last month’s gains and this month’s declines were extremely narrow. For that reason, prices appear to be consolidating within their current range, offering no clear direction for the coming month.

Indonesia plans new export taxes

Indonesia continues to add value to its nickel reserves. The hope is that doing so will help boost its stainless steel and battery production capacity through export taxes on raw materials. In 2020, Indonesia completely banned the export of nickel ore. The aim was to pressure its mining sector to invest in refining capacity.

That move forced China to replace ore imports with nickel pig iron and ferro-nickel in an effort to feed its stainless steel mills. Now, Indonesia plans to add Export tax on both those products. It should provide funding to allow for additional investment in its steel supply chain. From 2021, only Indonesia accounts roughly half All global nickel production.

Historical impact on nickel prices

The first export ban on nickel ore occurred January 2014. After the implementation of that ban, Nickel prices It was up more than 39% in the first five months of that year. Eventually, market dynamics drove prices lower again. This dramatic price rise occurred despite weak economic conditions around the world, including parts of the EU. As for Indonesia, the ban had the intended effect as several companies in both Indonesia and China soon announced plans to build NPI facilities in the archipelago. Outside of Indonesia, the ban forced countries such as China, Australia and Japan to pursue other sources of the metal. Not too long ago, companies sourced direct ship ore (DSO) from places like the Philippines and the Solomon Islands.

Indonesia considerably made easy Ban in early 2017. This is due to several factors. A 2016 budget deficit. Another ban was related to how successful it was – spurring the development of nine additional nickel smelters (up from two). Ultimately, this led to a nearly 19% drop in nickel prices in the first half of 2017.

Nickel futures prices and Chinese imports

Despite previously stated intentions to reimpose the export ban in 2022, Indonesia accelerated its resumption to January 2020. This decision was aimed at promoting the domestic refining sector which saw rapid development at that time. This move led China to increase NPI and stainless steel projects in Indonesia, as it dramatically limited ore imports. Even Chinese imports of NPI from Indonesia rose up Consequently. However, the reinstatement of the ban did not produce the same effect in terms of price trends. This may be due to an emerging epidemic. Instead, prices remained in an overall slump that didn’t bottom out until late March of that year.

Export taxes on Horizon

The recent announcement of potential export taxes comes as a result of the increased flow of NPI exports. This is supported by the forecast increase in the number of domestic NPI and ferro-nickel processing facilities. In fact, current estimates predict an increase from 16 facilities to 29 in just five years. Still, the low-value product and limited exports of NPI encourage foreign investment in Indonesia as the country pursues battery and stainless steel production. This forces importers like China to look for alternative sources of supply.

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However, the announcement has not yet resulted in any significant rise in prices. Instead, nickel prices continued to decline as their recent rally stalled in early August. According to Deputy Coordinating Minister of Maritime and Investment Affairs Septian Hario Seto, the tax could start from Q3 2022. No formal date has been announced yet. When it comes, the mere announcement will trigger a sharp rise in Indonesia’s NPI exports as countries prepare to absorb the tax. Of course, any real reaction from nickel prices will follow the determined levy date.

The European Commission will launch an antitrust investigation

On July 26, the European Commission was started A new anti-circumference probe. The subject is hot rolled stainless sheets and coils imported from Turkey, but originated in Indonesia. Eurofer, the European Steel Producers Association, triggered an investigation into allegations that imports from Turkey violated anti-dumping measures imposed against Indonesia. Indonesia is home to several Chinese stainless steel manufacturers. At this time, the case is expected to be concluded in the next nine months. Meanwhile, all imports of SSHR from Turkey will be registered with immediate effect as instructed by the EC.

Could the US be ahead?

So far, President Biden has largely continued the protectionist approach against China from his predecessor. While the outcome of the investigation and the subsequent response to its findings remain inconclusive, Europe’s actions could prompt the US to follow suit. After all, anti-dumping is always a politically expedient agenda. Furthermore, the investigation could cause items once destined for Europe to shift toward the US market. If that happens, it could embolden US mills to lobby for political action to protect domestic interests.

By AG Metal Miner

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