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Indonesia, Philippines Vie For Dominance In Nickel, And Confuse Traders -- Barron's Blog

14 Mar 2017 4:00 am

By Shuli Ren

Nickel is now in play for investors that specialize in the political dynamics in the Philippines and Indonesia.

The Philippines' President Rodrigo Duterte has been bidding up nickel's prices by wanting to impose a mining ban out of concerns for environmental damages. Yesterday, Duterte said he was looking at a total mining ban and accused miners of "giving funding to the other side to destabilize me". ""When it comes to the preservation of my country, the land... I will do what is necessary," said Duterte. As a result, nickel's price jumped 2.8% overnight. The Philippines has about 10-20% of global nickel mining capability.

Indonesia, another major nickel producer, could have helped bid up nickel's prices further, except it flip flopped and reversed its mining exports ban in January, three days after the ban came into effect.

As a result, nickel prices are back to where it was in the middle of 2016, because Indonesia and the Philippines' policies are netting each other out. Morgan Stanley's Tom Price, a nickel bull, wrote:

Indonesia's thinking of allowing >5Mtpa on Ni-in-ore exports, probably via Antam = 45-85ktpa (@ 1.0-1.8 Ni%; excl. conv. losses) of contained nickel. Depending on the timing of execution of evolving SE-Asian govt industry/trade policies, such a lift in exports could largely offset a potential 120-160ktpa cut by the Philippines.

The return of nickel's price to mid-2016's level suggests that the market expects a net-neutral trade outcome for all of SE-Asia's mine supply changes (i.e. given that global demand growth appears intact). So we remain frustrated nickel bulls for 2017, forecasting a 21%yoy lift to US$11,660/t. This is based not only on the net-impact on Asia's mine supply (global supply down 1.2% YoY to 1.95Mt), but also on a robust China-centric lift in global demand growth.

Nickel has gained 2% this year, underperforming the PowerShares DB Base Metals Fund's (DBB) 6.8% gain.
 More at Barron's Asia Stocks to Watch blog, http://blogs.barrons.com/asiastocks/ 

(END) Dow Jones Newswires

March 14, 2017 00:00 ET (04:00 GMT)

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