Nickel Jumps on Indonesian Export Ban Report

Nickel prices on the London Metal Exchange notched Thursday the highest close in over a year, surging more than 7% on media reports about a ban on ore exports in Indonesia.

Three-month nickel contracts on the LME rose as high as $16,690 per metric ton earlier in the session, but settled at $15,880 per ton—still a 7.2% uptick from the previous day.

Since the start of the year, Nickel on the LME has risen over 50%, making it one of the best-performing commodities globally.

The main driver for nickel’s rise was a report that the Indonesian government could impose an export ban on nickel ore sooner than originally anticipated by the market, raising the specter of a tighter supply next year, according to analysts.

The original plan was for Indonesia to ban exporting nickel ore by 2022, as part of the country’s plan to build up its manufacturing base by using the country’s raw resources.

According to a Thursday report from Reuters, Indonesian officials are considering tightening the ban ahead of schedule, but haven’t commented on the possibility. That hasn’t stopped traders from reacting.

“The markets are concerned,” said Edward Meir, a commodity consultant at broker-dealer INTL FCStone in a note.

Indonesia is a leading producer of nickel ore, along with the Philippines and China.

Nickel prices had already been on the rise this year due to a mix of supply disruptions world-wide and higher demand for the metal from the electric-vehicle market, specifically for batteries.

However, nickel demand isn’t immune to the uncertainty over the U.S.-China trade tensions. On Wednesday, Citi Research cut its nickel-demand growth forecast for 2019 to 4.7% from 5.8%, citing the recent trade war escalation. However, Citi noted that the growth of the electric-vehicle market would likely offset further demand loss.

Slowing activity in China could also eat into nickel demand. The most recent gauge of China’s manufacturing showed the sector still in contraction. The country’s national purchasing managers index came in at 49.7 in July—an improvement from June but still stuck below 50.

Should Indonesia choose to ban nickel exports earlier than 2022, then the world-wide nickel deficit would increase to roughly 100,000 metric tons, according to Citi.

However, without this ban, nickel prices may soon see a potential selloff, analysts said.

“For me, unless Indonesia bans nickel now, these prices aren’t justified,” said Colin Hamilton, managing director of commodities research for BMO Capital Markets.

Base metals on the LME were up Thursday. Lead, which is often used in auto-part manufacturing, was up 3.3%, while zinc rose 1.9%, aluminum added 1.9%, and copper climbed 1.6%.

Write to Kirk Maltais at Kirk.Maltais@wsj.com

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