Nickel prices have surged nearly seven per cent in the past month with fears over supplies from Russia adding to Indonesian curbs on shipments of unprocessed ores.

Among base metals, nickel has been the best performer in the March quarter, gaining nearly 15 per cent. The rise is the most in the last four years.

That nickel was expected to surge this year was no doubt, given the problems of supplies from Indonesia.

Political tension

The unexpected factor that has aided the rise is Russia’s dispute with Ukraine over Crimea. NATO, led by the US, has come up with sanctions against Russia, which along with the Philippines and Indonesia is the largest producer of nickel. These sanctions, restricted to individuals till now, have led to fears that Russian export of nickel could be disrupted, pushing

Indonesia’s curb on ore exports is aimed at derive more value from its mineral resources in the face of weakening commodities market.

Indonesia accounts for a fifth of the global nickel supply. China is the major buyer of Indonesia ore to feed its stainless steel and nickel pig iron units. The ban resulted in China nearly doubling its purchases from Indonesia.

Output/price forecast

Barclays has forecast that the Indonesia ban could result in nickel ore output plunging to this year. This will result in the market surplus shrinking this year as well as next year. As a result, prices are projected to increase 24% over current pricing.

(Business Line April 3, 2014 “Why nickel prices are surging”)