The closure of metallurgical plants in Europe is an opportunity for this Southeast Asian country

Experts predict that nickel prices will continue to decline in the near future. After the LME (London Metal Exchange) tightened nickel trading and the conflict escalated in Ukraine, global supply continued to decline. In addition, it is expected that the current increase in Indonesia's nickel production will have more influence on the price trend. September and October are usually peak times for annual nickel purchases, but the metal is most likely going to have a hard time in the fourth quarter.

Indonesian production has a big impact on prices

Indonesia has abundant natural deposits including tin, nickel, cobalt and bauxite ores – some of which are important raw materials for the production of electric vehicles. The Southeast Asian country is one of the world's top nickel producers and could benefit significantly from the metal's rising prices.

In fact, about 23.7% of the total nickel product in the world comes from Indonesia. And in the past year alone, the country has produced 814,000 tons of nickel. Thereby, the country earns more than 20 billion USD annually from steel and steel-related products.

 

Photo: Reuters

As part of a plan to develop the domestic economy, Indonesia banned the export of nickel ore in January 2020. The government also pledged to gradually stop exporting other raw materials.

Indonesian President Jokowi Widodo also added that the cessation of nickel exports will reap more benefits in the future, and shared more about the plan to stop exporting bauxite ore and next. are gold and tin ores.

President Widodo said that the people of Indonesia will be the ones who will benefit the most, "This will create jobs as well as bring tax revenue to the country, new business opportunities when companies domestic companies will export nickel".

The shutdown of smelters in regions like Europe and China will make Indonesia an attractive nickel alternative. Many experts say Indonesian companies have a golden opportunity, especially after the LME exchange tightened nickel trading in March.

Not only that, but the demand for nickel in electronics is also increasing, and the use of the metal in materials such as batteries is driving demand. Processed nickel production is likely to grow further in Indonesia, as it has the ability to convert grade 2 nickel ore into grade 1, which is used as a feedstock to make electric vehicle batteries.

Future nickel price trend

The nickel market plunged into a tumultuous trading day on March 8, during which the metal rallied 70% in a single day at the LME and quickly broke the $100,000/ton barrier. The strong rally prompted the LME to halt nickel trading. Investors were unhappy with the LME for allowing the price to rise 250% in less than two days, then canceling $3.9 billion in trades. And when trying to reopen the market, the exchange's electronic trading system kept crashing. Many transactions have been cancelled.

Nickel price movement on LME in the past 1 month (Source: LME.com)

While volume remained low, this did not stop the price of nickel from rallying despite being in a strong downtrend. At the moment, nickel is still within resistance and support. Unfortunately, this also means that there is no clear direction for either side. In the long term, nickel experts, traders, and buyers all expect to see a specific and identifiable price trend.

Reference: Oilprice

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