Chinese Nickel Ore Imports: Snakes And Ladders?
China has played a pivotal role in global nickel ore trade, accounting for almost 90% of global imports over the last five years. However, the strong growth in Chinese nickel ore imports in 2010-13 has not been sustained, with imports falling for the last three years. This has reflected developments on both the demand and supply side, and a wide range of factors now seem to be at play.
Chinese seaborne imports of nickel ore grew rapidly between 2007 and 2013, rising from 4mt to a peak of 71mt. Low-quality nickel ore deposits in the Philippines and Indonesia started to be shipped to China, where nickel ore began to be used to produce nickel pig iron (NPI), a cheaper alternative to pure nickel in the production of stainless steel. By 2013, China’s nickel pig iron production reached 500,000t of nickel, from 2,500t in 2006, facilitated by the high availability of imported nickel ore supplies.
Indonesia and the Philippines together accounted for 99% of Chinese imports in 2013, with shipments from Indonesia totalling 41mt in 2013, 58% of the total. The strong growth in China’s imports from Indonesia in 2013 was partly supported by stockpiling, following the announcement that exports of some unprocessed raw minerals from Indonesia would be banned at the start of 2014. This firm pace of imports led to nickel ore stockpiles at Chinese ports reaching a record 24mt at the end of 2013.
A Few Steps Back
Following the introduction of Indonesia’s mineral export ban, Chinese nickel ore imports fell by an average of 23% p.a. in 2014-16, to reach 32mt in 2016. While nickel ore shipments from the Philippines to China increased following Indonesia’s ban, rising to 36mt in 2014, this was insufficient to fill the gap left by Indonesia, with nickel ore output in the Philippines limited by poor weather, the low nickel ore price environment, and more recently, mining suspensions by the Philippine government in a crackdown on environmental degradation. Chinese production of nickel pig iron has decreased, with additional pressure in recent years on nickel pig iron producers from Beijing’s attempts to improve air quality.
An Unclear Way Ahead?
Looking ahead, there is a large degree of uncertainty over China’s nickel ore imports in 2017. Chinese nickel pig iron production grew in 2016 for the first time since 2013, supported in part by improved producer profit margins. However, environmental concerns and rising imports of much lower volume, processed nickel pig iron from Indonesia pose further threats. Prospects for exports from the Philippines remain unclear, with potential for the current suspension on 50% of nickel ore mining capacity in the country to be expanded. However, Indonesia relaxed its ban on raw mineral exports in January 2017, while additional shipments may also emerge from New Caledonia.
So, Chinese nickel ore imports have seen two distinct phases over the last decade, one with rapid growth and another with volumes easing back. With such a wide range of factors now in the mix, it remains to be seen whether import growth can be achieved again this year.