CNN Indonesia

Tuesday, 13 Feb 2024 22:10 IWST

Foreign analysts say that Indonesia and China plan to reduce nickel production by 100 thousand metric tons in 2024 to prevent the price of this commodity from collapsing. (ANTARA PHOTOS/JOJON).

Jakarta, CNN Indonesia —

Foreign analysts say Indonesia and China plans to reduce production nickel 100 thousand metric tons by 2024 to prevent a collapse in commodity prices.

Traders and analysts say this is because Indonesia and China are trying to limit losses in the wake of falling prices for the metal used in making stainless steel and electric vehicles.

Quoting Reuters, they added that further production cuts would be made again if Indonesia and China wanted to increase prices and remove surpluses from the market while stopping losses.

Nickel prices will actually jump in 2022 to a record of over US$100 thousand or the equivalent of IDR 1.5 billion (assuming an exchange rate of IDR 15,579 per US dollar) per metric ton.

This price increase occurred after expectations of reduced supply from the main producer Russia after the invasion of Ukraine prompted the market to cut expectations of lower prices.

But now, the price of nickel has fallen to US$16 thousand or around Rp. 249.3 million per ton due to the surge in production in Indonesia.

Meanwhile, in 2023, Indonesia contributed more than half of the global mining supply, which was estimated at around 3.4 million metric tons. Meanwhile, supply in Indonesia reached 30 percent of the total in 2020.

The additional supply exacerbated the impact of a weakening economy that reduced demand, with Western miners, including BHP, then freezing assets, delaying projects or reducing production.

According to Macquarie analysts, nickel production cuts have so far removed more than 230 thousand tons or around 6 percent of potential supply in 2024. However, this is not enough to push up prices.

Then, global producer sources also said deeper cuts were urgently needed to prevent financial losses. Consultant Benchmark Mineral Intelligence estimates cuts of more than 250 thousand tons are needed to balance the global nickel market this year.

Meanwhile, analysts say that most of the surplus and high inventories are in nickel pig iron (NPI), which is a cheaper alternative to high-grade nickel for stainless steel production. Indonesia and China account for 70 percent of global nickel supply, most of which is NPI.

“If we take a disruption allowance of 3 per cent or 100 thousand tonnes, around 100 thousand tonnes more would have to be cut to balance the market,” said strategist at Macquarie Jim Lennon.

“With the NPI price at around US$11 thousand per ton, there should be an adjustment in supply in China and Indonesia,” he added.

Lennon estimates that NPI production costs are US$10 thousand-US$11 thousand per ton and US$12 thousand or Rp. 187 million per ton in Indonesia and China. This price is considered very difficult to make a profit.

Bank of America analysts argue that with the cost of wind materials, including nickel ore, electricity and coal reaching 73 percent of NPI prices, many NPI factories from China are becoming unprofitable.

Issues related to nickel prices have recently been widely discussed. Previously, Co-captain 2 of the AMIN National Team, Thomas Lembong, said that global nickel prices had fallen by around 30 percent in the last 12 months. He then predicted that nickel stocks in the world would experience the largest surplus in history.

This decline is considered to be due to the global supply being “flooded” with nickel from Indonesia.

“So with the intensive construction of smelters in Indonesia, we flooded the world with nickel. Prices fell, conditions occurred oversupply,” said the man who is familiarly called Tom in a video uploaded to the YouTube channel Total Politik, quoted on Tuesday (16/1).

This statement by the man who is familiarly called Tom was later denied by the Coordinating Minister for Maritime Affairs and Investment (Menko Marves) Luhut Binsar Pandjaitan.

He denied that world nickel prices had fallen due to a flood of supplies from Indonesia. Luhut believes commodity prices should be seen from long-term averages. He said nickel price movements were still in search of a balance point.

“That’s at the end of looking for the equilibrium. He’s looking for that and that himself. You can look at whatever commodity it is, it can’t be from a year to two years, it has to be 5-10 years. You have to look at the cumulative price. Then look at the average price,” said Luhut at the office. Coordinating Ministry for Maritime Affairs and Fisheries, Central Jakarta, Wednesday (7/2).

He doesn’t mind if many mines in other countries close because of price movements. Luhut said the most important thing was for nickel mining in Indonesia to continue.

“Yes, let the world’s mines close, as long as we don’t get involved,” he said.

Tom then responded to Luhut’s statement. He asked Luhut to be careful when speaking.

According to Tom, nickel prices will still fall in the next few years. He assessed that the potential for nickel mines and smelters in Indonesia to close is still very possible.

“Be careful about speaking too early because this story is not finished yet, there are still several years left where nickel prices will continue to fall and weaken with consequences for the smelter and nickel mining industry in Indonesia,” said Tom as quoted by detikFinance.

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2024-02-13 15:10:29
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