(The opinions expressed here are those of the author, a columnist for Reuters.)
LAUNCESTON, Australia, March 27 (Reuters) - Indonesia's ban on exporting unprocessed nickel and bauxite has been in force for more than two months, but the impact has yet to fully show up in Chinese imports.
China's trade data for February shows nickel ore imports from Indonesia were about 3.1 million tonnes, down only 2.5 percent from the same month a year earlier.
Indonesia's ban on exporting unprocessed minerals took effect on Jan. 12, and while there have been some moves to relax restrictions on copper and other ores, the total ban on nickel and bauxite remains.
Nonetheless, Indonesia's share of China's total nickel imports in February was 87 percent, showing the world's biggest buyer of commodities hasn't made a marked shift as yet to alternative suppliers.
In the first two months of the year China imported 9.2 million tonnes of nickel ore from Indonesia, a 29.1 percent jump over the same period in 2013.
The strength in January can be explained by Chinese buying ahead of the export ban starting, and the resilience in February is most likely down to cargoes that left Indonesia in early January only being booked as February arrivals due to the Lunar New Year holiday in late January and early February.
With bauxite, used as a the raw material for making alumina, which in turn is used to produce aluminium, there was a reduction in China's February imports.
China imported a total of 3.2 million tonnes in February, of which 2.13 million came from Indonesia.
Imports from Indonesia were 22.2 percent lower than for February 2013, but a bumper January means that imports for the first two months were 44 percent higher at 8.3 million tonnes.
Before the ban on unprocessed exports, Indonesia was the world's top nickel ore exporter and the largest bauxite supplier to China, accounting for around 12 percent of the global market in both cases, with the trade worth about $3 billion a year.
Indonesia has yet to release February trade data, but the January numbers showed shipments of ore fell by 70.1 percent in January from December, enough to tip the trade balance into deficit after three months of surplus.
In theory, the Chinese trade data for March should show zero imports of nickel ore and bauxite from Indonesia, as it's extremely unlikely that any cargoes would have been on the water for six weeks.
Assuming that imports from Indonesia do drop to close to zero, the question becomes what happens next?
CHINESE STOCKPILES WON'T LAST
With bauxite, Chinese buyers are believed to have stockpiled close to 18 months worth of consumption, which is consistent with the massive 79 percent leap in imports last year.
Eventually, this bauxite stockpile will run low, and while there may be limited alterative suppliers, the Chinese may simply move up the value chain and increase imports of alumina.
Given that global alumina and aluminium markets remain hugely in surplus, it will take time for the absence of Indonesian bauxite to be felt.
It may also never be felt if alumina smelters are built in Indonesia, which after all is the political aim behind the ban.
It will shift some of the dynamics of where alumina and aluminium are produced, but Indonesia's ban on bauxite is at best a slow-burn issue for the markets.
A drop in nickel ore may be harder for China to manage, as it's believed stockpiles are not as extensive as for bauxite and are held mainly by larger producers.
The bulk of Indonesian nickel ore is used by Chinese companies to produce nickel pig iron, and it's likely that smaller producers will soon feel the impact of the Indonesian ban, and are also unlikely to be able to make up the shortfall by using alternative suppliers, such as the Philippines.
This should result in lower supplies of nickel pig iron in China, meaning imports of refined nickel are likely to increase.
This does provide justification for the 12.5 percent rally so far this year in London 3-month nickel, but the next few months will show whether Chinese nickel imports will actually rise, or whether the market may have got ahead of itself.
The other factor is that stainless steel, the main use for refined nickel, remains a market experiencing slow demand growth in China, and this may limit the need for nickel imports in the next few months.