COMMODITY MARKETS IN 2020.

Byline: S.KAMAL HAYDER KAZMI

NICKEL

International studies revealed that in late August 2019, Indonesia announced it was bringing forward an export ban on nickel ore (grade less than 1.7 percent) from 2020 onwards instead of the initial deadline of 2022. Mining firms were seen to be increasing their ore exports considerably, and investments into the processing sector were somewhat lacklustre. Indonesia is a main nickel ore supplier to China, exporting around 15 million tons of ore (+36 percent YoY) over the first 9-month of 2019. Indonesia's share of Chinese nickel ore imports is around 38 percent, slightly below the top supplier Philippines of around 58 percent.

The ban on Indonesian exports would create a short-term supply gap for the nickel market, chiefly to China as it had increased large-scale capacity down the supply chain from NPI (nickel pig iron) to stainless steel. The studies also identified that Indonesia's rationale for the ban was to encourage investments towards downstream sectors.

Over the last couple of years, the industry has seen a surge in investment into Indonesia from ore mining, NPI to stainless steel as well as HPAL (High-Pressure Acid Leaching). And a large chunk of that investment comes from overseas. That's evidenced by the growing exports of NPI. These could increase from around 260kt in 2018 to around 360kt in 2019 and further to 500+kt in 2020 as Tsingshan and Antam, among others, add capacity. Nevertheless, the supply gap to the Chinese NPI industry remains unresolved despite prebuilt ore stockpiles, and this may start to lead to a curtailment in Chinese NPI sectors as inventories run down.

If circumstances change again and Indonesia really does stick to the ban from the beginning of 2020, the market will begin to feel tightness towards the second half of 2020. The nickel market is set to see a marginal deficit over 2020 if Indonesia sticks strictly to the ban. It's hard to stick to a single baseline forecast. The Experts believe that price volatility will remain high. The reason is deeply rooted in an industry which has been reshaping itself both regionally and structurally, and which has partly resulted in an issue in the pricing mechanism

IRON

Iron ore supply should normalize in 2020 after a standout 2019. It was one of the commodity outperformers because of supply disruption and relatively healthy demand. Iron ore prices did soften in the second half of the year. It is also reported that around 48 million...