UPDATE 1-Indonesia mineral export ban boosts nickel price, policy uncertainty remains

James Regan
Sunday, 12 Jan 2014 | 8:58 PM ET


* Nickel price, Australian miners rise on Indonesia export halt

* Freeport halts copper exports to await clarity on rules

* Ban on ore exports to benefit BHP Billiton, Western Areas, Mincor

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SYDNEY, Jan 13 (Reuters) - Global nickel prices and shares in Australian miners rallied on Monday after a ban on unprocessed mineral exports by top supplier Indonesia came into effect, a policy that could trigger a recovery in long-depressed nickel prices.

Indonesia introduced the controversial ban on Sunday on a range of raw mineral ores in order to force home companies to build processing plants on Indonesian soil, but policy confusion remains.

Last minutes changes approved by President Susilo Bambang Yudhoyono - aimed at minimising the short-term economic impact - appear to give reprieve to exports of copper by U.S. mining giants Freeport McMoRan Copper & Gold and Newmont Mining Corp.

Shortly before the ban took effect, Freeport halted copper exports and said it would not resume them until there was clarity on which minerals can be shipped.

Freeport Indonesia CEO Rozik Soetjipto told Reuters he believed the company would be allowed to continue shipping copper concentrate, but was awaiting government confirmation.

Indonesia is the world's biggest exporter of nickel ore, refined tin and thermal coal and home to the fifth largest copper mine and top gold mine.

Indonesian authorities offered no such relief to the nickel and bauxite industries.

London Metal Exchange nickel rose 4 percent on Friday and added a further 2 percent in early Asian trading on Monday, helping push shares in Australian producer Western Areas up more than 10 percent.

Indonesia accounts for about 15 percent of global nickel supplies. It is a major supplier to China where its high grade laterite nickel, found only in tropical regions, is used to produce nickel pig iron, a cheaper alternative for making stainless steel than high-purity nickel.

China requires around 850,000 tonnes a year of nickel -- nearly half global consumption -- with around 450,000 tonnes of that coming from nickel pig iron.

China rarely draws down on nickel stocks held by the London Metal Exchange, but some analysts think this could change if its supply of Indonesian nickel pig iron is cut off, underpinning prices.


The nickel price, wallowing not far from four-year lows, had largely failed to react to the looming ban because of a global oversupply and scepticism over whether Indonesia would implement the ban, given its history of stepping back from controversial policies.

Western Areas rose nearly 12 percent on Monday while Mincor Resources added 2.7 percent and mining major BHP Billiton was up 0.6 percent. Despite nickel being one of BHP's least profitable businesses, it remains the world's third-biggest nickel producer, with operations in Australia and Colombia.

In Indonesia, the ban has already led to the lay-off of almost 30,000 mine workers as mines cut back operations, according to the Indonesian Mineral Entrepreneurs Association, as well as a halt in some shipments.

Mine lay-offs have already sparked protests in Jakarta and thousands more could see the export ban become a hot political issue in 2014's legislative and presidential elections.

Indonesia is also a major supplier of bauxite, the basic raw material in the manufacture of aluminium.

Unlike nickel, Australia's bauxite sector showed little reaction, with Bauxite Resources and Cape alumina unchanged.

Rio Tinto, which plans to close an alumina refinery in Gove, Australia, stands to benefit from a bauxite ban as it intends to step up outside sales of bauxite a year once the refinery closes.

(Reporting by James Regan; Editing by Ed Davies and Richard Pullin)

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