Glencore sees nickel price rising on global supply shortage

[JAKARTA] Glencore Plc, the commodities trader and miner, expects nickel prices to climb through 2018 as demand outstrips supply, assuming Indonesia continues its policy of curbing ore exports and encouraging local processing.

"We believe we've seen the bottom, both in terms of the actual spot prices experienced earlier this year and also in terms of the annual average we will see in 2016," said Kenny Ives, the company's head of nickel.

"We expect spot prices to be higher and we also expect the average to be higher," he said in an interview in Jakarta on Tuesday.

Nickel prices have advanced 16 per cent this year on the London Metal Exchange as global stockpiles declined.

The Philippines, the world's largest shipper of mined nickel used in stainless steel, is carrying out an environmental audit and closing some mines that don't meet international standards, curbing supply. Output of stainless steel in China, the world's biggest producer, has also been increasing this year as new capacity fires up.

The global deficit will probably be about 100,000 metric tons in 2016 in terms of nickel metal, and shortages will continue going forward, said Mr Ives, who declined to give specific forecasts. He is scheduled to address a Metal Bulletin Ltd conference in Jakarta on Wednesday morning.

Indonesia halted the export of unprocessed ores in 2014, forcing companies to invest in domestic smelters as it sought to add value to its commodities locally and create more jobs. Mr Ives said the policy had been a success and there will continue to be an increase in processing capacity in the country.

The ban in South-east Asia's largest economy encouraged ore exports from the Philippines. Newly elected President Rodrigo Duterte has ordered a clampdown on mining that's hurting the environment and Environment Secretary Gina Lopez is scheduled to announce shortly the result of an audit that may result in the closure of more mines.

Even without the suspensions, Philippine exports will struggle in a low price environment as resources get depleted, Mr Ives said. The country could ship about 200,000 tons of nickel contained in medium and high-grade ore this year compared with roughly 300,000 tons in 2015, he said.

Chinese stainless steel production totalled 13.6 million tons in the first seven months of the year compared with 12.6 million tons a year earlier, data from Beijing Antaike Information Development Co show.

Nickel on the LME fell to US$7,550 a ton in February, the lowest level in more than 13 years, as the economy in China expanded at the slowest pace in a generation. Prices have since recovered to US$10,210 on Wednesday.

BLOOMBERG