Nickel Futures Rallied After Indonesia Considered Restricting Exports Of Low-purity Nickel Products

According to Reuters, Bahlil Lahadalia, minister of Indonesia's Investment Coordinating Board, said in a speech on Friday that the country is exploring an export tax on products with a nickel content of less than 70 percent to drive the development of the local refining industry. Affected by the news, LME nickel futures intraday straight up, as of press rose still around 3%.

(LME nickel minute chart, source: Wind)

The news did not come as a complete surprise to the market, as Indonesia, which has the world's largest nickel reserves, has been trying to build an electric vehicle chain around the metal, including nickel mining, refining, battery production and electric vehicle assembly. Bahlil said on Friday that most Of Indonesia's exports contain between 30 and 40 percent nickel, a figure that could be raised to 70 percent through the local chain. Bahlil said it was possible to impose a tax if an exporter tried to export a product with a nickel content of less than 70 percent, but the investment minister stressed the discussion was still at a preliminary stage and no conclusions had been reached.

It is reported that Indonesia's nickel processing industry to nickel pig iron or nickel iron and other low nickel content products. The country halted exports of unprocessed nickel ore last year in a show of determination to support its "downstream" supply chain.

Indonesia has a lot of bargaining power to attract downstream investment related to (nickel), but a policy shift could spook investors, said Steven Brown, an independent mining consultant. Sudden export restrictions create uncertainty and could scare off more cautious investors. Indonesia has managed to attract some big investments, such as hyundai and LG battery plants under construction.