The Government of North Maluku Province, Indonesia advised the mining activities in Sagea region be suspended due to environmental pollution on September 4, involving five mining companies, namely PT Weda Bay Nickel (nickel), PT Halmahera Sukses Mineral (nickel), PT Tekindo Energi (nickel), PT First Pacific Mining (nickel), and PT Karunia Sagea Mineral (nickel, limestone).
Since the advising was not mandate, the mines still maintained normal production, hence the short-term influence is controllable.
Among the five mines involved, PT First Pacific Mining and PT Karunia Sagea Mineral have had no yield as of now. PT Weda Bay Nickel, PT Halmahera Sukses Mineral, and PT Tekindo Energi are the major nickel ore suppliers in Indonesia which mainly supply local smelters, taking up nearly 40% of Indonesia's monthly supply.
Nevertheless, the move aggravated the market concerns over nickel ore supply, in addition to the anti-corruption investigation launched by the Indonesia government earlier, which even pushed up the ore prices in the Philippines by 30%.
As of the time of this writing, no new mining permit has been issued since the RKAB approval process adopted the old practice trailing the anti-corruption investigation, which was more completed. If the problem is not properly addressed by year-end, the supply in the fourth quarter is expected to be reduced by at least 30%, or 12 million wet tonnes.
Rising raw material costs have lifted the prices across the industry chain.
For example, nickel sulfate prices have bottomed out since end-August with rising cost and depletion of low-priced sources when MHP and high-grade nickel matte prices were quite firm, despite falling production scheduling of precursor manufacturers.
Looking ahead, nickel prices are expected to stay rangebound through September on the backdrop of rising risk appetites among market investors boosted by a series of stimulus policies, as well as anticipated sufficient supply of pure nickel following the commissioning of electro-winning production lines in Indonesia, which will cap nickel prices to some extent.
Written by Aggie Hu, huchenying@mysteel.com