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The two nickel production cuts amount to 34Kt of lost output for 2014, a significant volume in the context of the 2014 86Kt surplus projected (pre-cut announcement). The timing of the production cut announcements are ..

05 Oct 2013

LONDON (Commodity Online): A possible significant reduction in nickel, nickel ore supply caused by shutdown of mine(s), smelters and a ban on nickel ore exports by the Indonesian governemnt are expected to support the commodity prices later this year and in the early 2014. However, persisting concerns over the health of the global economy are likely to limit a significant up-tick in the commodity prices.

Last week, Votorantim stated that it was shutting down its 19Kty nickel matte Fortaleza smelter in Brazil due to weak nickel prices. The facility is expected close its operations in November 2013 with no current expectation of a re-open date. The shutdown of the smelter may affect Mirabela’s 20Kty Santa Rita mine, which had a 50% off-take agreement with Fortaleza.

Glencore Xstrata has also announced it would temporarily shut its Falcondo mine and smelting facility in the Dominican Republic. The facility had been estimated to produce close to 15Kt ferronickel in 2013 and 2014, said London based Barclays in an e-mailed report.

The two nickel production cuts amount to 34Kt of lost output for 2014, a significant volume in the context of the 2014 86Kt surplus projected (pre-cut announcement). The timing of the production cut announcements are somewhat surprising given there remains a clear risk that the Indonesian ore export ban causes a significant disruption to the nickel market early next year with subsequent bullish price effects, Barclays noted.

Since high grade Indonesian nickel ore is a vital feed source for RKEF NPI producers, a cessation in ore export flows from the country would have significant ramifications for the market balance given RKEF output this year. The situation remains in flux, and it will be interesting to see if other producers are as willing to write off the ban effect on nickel prices as Votorantim and Glencore Xstrata seemingly have, Barclays concluded.


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