Nickel slipped on Friday from a 16-month high amid uncertainty over whether top producer Indonesia would soon ban ore exports while other base metals drifted lower after weak Chinese data.
Indonesia is discussing bringing forward a ban on mineral ore exports that was previously set to begin in 2022 though no decision has yet been made, its trade minister said on Friday.
Worries about possible shortages had pushed benchmark nickel on the London Metal Exchange nearly 40 per cent higher since early July to a peak on Thursday of $US16,690 a tonne, its highest since April 2018.
It has since pared those gains.
“I don’t think a ban makes sense and it looks like the market is pricing in a full ban, so I think the risks are to the downside,” said Colin Hamilton, director of commodities research at BMO Capital.
The rational thing would be for Indonesia to conduct an audit of refined nickel projects and slap an export ban only on those not making adequate progress, he added.
“If nothing happens, then the nickel price is about 20 per cent too high, but there’s a chance and it’s hard to quantify that chance, that we get something, and then the nickel market is suddenly in a bigger raw material deficit than we thought.”
Three-month LME nickel dropped 2.1 per cent in final open-outcry trading to $US15,550 a tonne but ended the week with a gain of about 7.5 per cent.
LME zinc tumbled 3.1 per cent to close at $US2,233 a tonne, the lowest since October 2016, on worries about oversupply.
“Supply is now expected to outweigh demand in the second half of 2019 as new mine supply returns to market and Chinese bottlenecks retreat,” Scotiabank commodity strategist Nicky Shiels said in a note this week.
Supply of stainless steel ingredient nickel pig iron on the Chinese spot market is “still relatively tight and some stainless steel plants have already locked in orders until the end of September,” Huatai Futures said in a note.
Metals were pressured after factory gate prices in top metals consumer China shrank for the first time in three years in July, stoking deflation worries and adding pressure on Beijing authorities to deliver more stimulus.
The premium of cash LME lead over the three-month contract jumped to $US29.50 a tonne by Thursday’s close – the strongest since June 11 – from $US3.50 two days earlier, indicating near-term shortages of material in the LME system.
The premium eased to $US21 on Friday.
One party has control of 50-80 per cent of LME inventories, data showed on Friday.
LME lead dipped 0.1 per cent to finish at $US2,069 a tonne after touching a two-week high of $US2,082.
LME copper shed 0.7 per cent to close at $US5,755 a tonne, aluminium edged down by 0.3 per cent to $US1,772 and tin added 0.3 per cent to $US16,900.