We’ve all read a lot recently about the Indonesian export ban and it’s effect on the global market place. This year when Indonesia made good on it’s word to ban raw exports of metals the market responded with an increase in the price of many base metals. This also caused a stir among companies relying on base metals for production as talk of a global deficit loomed and demand outstripped supply.
No where was this more true than in the power-house markets of China. China had come to rely on their close neighbor for much of their iron ore needs. When Indonesia implemented their ban, China looked to other neighbors for help and found it in the Philippines.
You can imagine the dismay last week when the Philippines announced their intention to implement a similar ban on raw exports. “If the Philippines follows on its word then it would greatly affect nickel’s standing in the commodities market. Three-month nickel at the LME is at $16,250 per tonne at the beginning of December.”
As investors have noticed, the performance of nickel on the global markets this year has been elevated to levels not seen for some time. This is due to a coupling of the Indonesian export ban and increased political pressure on Russia where Norilsk Nickel, the world’s largest nickel producer, is based.
With a potential to bring the Philippines out of the equation, the world could see a supply shortage like no other. The response to the Indonesian ban has been to continue on a business as usual path and use stockpiles of raw materials to replace the supply that has been lost. Of course that strategy will not work forever and the world could face serious shortages if the Philippines implements a ban, Indonesia doesn’t reopen their market and the west continues to put political pressure on Russia.
With supply and demand growing further and further apart, the world will need another raw producer to step in and to do it fast. The question is, who is next in line?