Vale Sees Nickel Over $20,000 a Ton on Indonesia Ban

Nickel will climb significantly in 2015 and may advance to more than $20,000 a metric ton in the next few years because of Indonesia’s ban on ore exports, said Vale SA (VALE5), the world’s second-biggest producer.

The restrictions that Indonesia put in place last month probably won’t be eased, Peter Poppinga, executive director for base metals at the Rio de Janeiro-based company, said in a Feb. 21 interview. Big price movements are unlikely this year because of the high level of stockpiles in China, he said.

The largest nickel-ore producer banned the export of unprocessed ores in January as it tries to transform itself into a maker of higher-value products. Nickel, used to make stainless steel, climbed 3 percent this year, beating all other base metals in London as Barclays Plc forecast that the curb will help to shift the global market to a deficit from 2015. Vale last week opened its Totten nickel mine in Ontario after investing about C$760 million ($686 million) in the project.

“Next year I see the nickel price jumping quite significantly,” Poppinga said in the interview at the mine. “It is about Indonesia today, everybody knows that. The ore ban is in place and it’s holding, and I think the authorities in Indonesia are very reasonable and very serious about that.”

Nickel for delivery in three months traded 0.1 percent lower at $14,314 a ton on the London Metal Exchange at 3:42 p.m. inSingapore. The metal is heading for a third monthly advance, the longest run of gains since the period to February 2011. The ban is bullish for nickel, especially from next year, Macquarie Group Ltd. said in a report dated Feb. 21.

Import Surge

China’s ore imports from Indonesia jumped to 6.12 million tons in January from 3.99 million tons a year earlier, the General Administration of Customs said last week, signaling the world’s biggest consumer boosted purchases before the ban.

A return to prices of about $20,000 a ton, a level last seen in 2012, “will not be a surprise to me,” Poppinga said. “In the mid-term, it will be distinctly higher than that,” he said, describing that period as “some years.”

The global surplus will narrow to 41,000 tons this year from an estimated 181,000 tons in 2013, Barclays forecast in a Jan. 13 report. There’ll be a 36,000 ton deficit in 2015, the first time since 2010 that demand exceeds supply, it said.

Indonesia’s government has no plan to change the ore-export rule, Saleh Abdurrahman, a spokesman at Energy and Mineral Resources Ministry, said on Feb 12. Nickel-ore output may tumble to 3.5 million tons this year from 60 million tons in 2013, the ministry said in a presentation to parliament on Jan. 29.

Ontario Operations

Vale’s operations in Ontario are profitable at current prices because of low costs and benefits from the sale of other metals such as gold, Poppinga said. The Totten project, about 40 kilometers (25 miles) west of the town of Sudbury, will replace declining production from older mines over time, he said.

“It’s not about increasing total production, it’s about making the business more competitive,” Poppinga said. The company, the largest producer after OAO GMK Norilsk Nickel, has no plans to close facilities in the region after halting work at its Frood mine about a year ago, he said.

“Sudbury is one of the best nickel assets in the world and in spite of the low nickel prices we are very competitive,” Poppinga said. “We are still making money.”