© Reuters. FILE PHOTO: Hot slag flows from trucks to the dumping site at the nickel processing plant operated by PT Vale Indonesia in Sorowako, South Sulawesi province, Indonesia July 28, 2023, in this photo taken by Antara Foto. Antara Foto/Jojon/via REUTERS
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By Mai Nguyen and Siyi Liu
(Reuters) – Nickel smelters in top producer Indonesia are making rare purchases of ore from the Philippines to ease tight supplies, people familiar with the matter said, upending trade flows of the raw material and pushing up costs across the supply chain.
Jakarta recently delayed the issuing of mining quotas and suspended operations at a key site of state miner Aneka Tambang (Antam) after an investigation into corrupt practices in issuing mining allowances.
While mining at other sites continues and Indonesia, which accounts for half of global mined supply, has said there is no shortage of ore, prices have risen about 8% this week, following a 10% surge a week earlier, local buyers say.
Some firms are now buying ore from neighbouring Philippines, the world’s No. 2 supplier, in the event that new mining quotas are further delayed, said three smelter managers, two nickel traders and a Chinese analyst.
All declined to be identified because they were not permitted to disclose the trade information publicly.
“(We) started imports from this month. It is economical,” said an official at a major smelter in Indonesia.
The person did not specify how much the smelter is buying but said the purchases are of low-grade limonite ore.
Indonesian miners will prioritise high-grade ore for their limited production quotas, the person added.
Indonesia imported 53,864 metric tons of nickel ore in the first half of 2023, up from 22,503 tons for all of 2022, Indonesian trade data showed.
But imports from the Philippines only started in May, and all arrived at Morowali port in a huge nickel processing park run partly by Chinese nickel giant Tsingshan Group, the Indonesian data showed.
Tsingshan did not respond to a call and email seeking comment.
Volumes in the first half from the Philippines were less than 1,000 tons in nickel content compared to Indonesia’s 1.6 million tons mined last year, data from the Indonesian government and the International Nickel Study Group (INSG) showed.
“The ore from the Philippines is generally lower grade than Indonesian material which will push operating costs higher due to lower production from same tonnage of ore,” said Wood Mackenzie analyst Andrew Mitchell.
“But the ore is cheaper by comparison with domestic ore currently and so this will offset some of the rising costs,” Mitchell said.
Indonesia exported much of its ore before a 2020 ban halted all shipments and attracted billions of dollars worth of investment in nickel smelting, mostly from Chinese companies.
Imports from the Philippines could rise to 100,000 tons for July and August combined because of the supply tightness, according to Chinese consultancy Mysteel.
The Philippines mined 360,000 tons of nickel in ore in 2022, or 11% of global supplies, according to INSG.
Rising demand for ore from the Philippines is also pushing up prices in China, as buyers stock up due to tighter Indonesian supplies and ahead of the rainy season in the Philippines starting in October, said a Chinese trader.
Philippines 1.3% grade ore landed at China’s Lianyun port surged 20.6% in the past month to $41 a ton, the highest since March, Mysteel data showed.
Source: Investing.com
