Following months of uncertainty surrounding Indonesia’s export ban on raw material exports, on January 12 the country defied the cynics by implementing its controversial policy, with nickel and bauxite exports most affected. Roskill notes that “despite previous speculation that the Indonesian government would consent to transitional arrangements, only the two largest copper producers in the country – Freeport McMoran and Newmont Mining – received any such relief. “Owing to a parallel planned increase in the export tax on copper concentrates from 20% to 60% by the second half of 2016, even these companies will find their competitiveness sorely tested.“In the first week of trading following the ban, nickel prices rallied from $13,680/t to $14,595/t an increase of 6.7%. Given that Indonesia accounted for 17% of mined nickel in 2013, by Roskill estimates, this market response may best be described as subdued, with the price increase thus far representing a mere blip in nickel’s long-term price charts. A further increase appears likely, but may come in the form of a gradual climb as stockpiles are rundown, with prices expected to increase to $16,000/t or beyond in 2014.”This increase will, however, depend on the future evolution of Indonesia’s export policy, as Roskill considers the ban’s coming into effect to represent merely another step in an on-going debate. Domestically, a legal challenge to the ban has been raised in Indonesia’s two highest courts, while early reports of lay-offs and protests in response to the ban are likely to prove fertile ground for opposition candidates in the April 9 legislative and July 9 presidential elections. As Indonesia’s current President is nearing the end of his two terms in office, a change in political leadership is inevitable, and the succeeding government’s stance on the export ban remains impossible to predict.International pressures may also conspire to effect a change in the policy. The Philippines is expected to be the main winner in the nickel market upheaval, with the country representing the only other largescale source of lateritic ore. Volumes of nickel ore exports from the Philippines are expected to increase, but the low-grade of Philippine ore is ill-suited for use in China’s modern rotary kiln electric furnaces . The use of the ore could increase production costs by as much as 30%, rendering the process economically unattractive to new producers even at prices as high as $17,000/t, although existing producers may maintain production to minimise losses and honour supply agreements.“On the flip-side,” Roskill reports, “China’s nickel pig iron and stainless steel industries are likely to emerge as the ban’s biggest losers, aside from Indonesia’s own treasury (in the near term). As such, the Chinese government may enter the political fray surrounding the nickel ban and attempt to effectuate an exemption for some of its companies, through diplomatic back-channels. Chinese-Indonesian relationships were normalised in 1990 and China has since grown to become Indonesia’s second-largest trading partner, behind Japan, with bilateral trade expected to reach $80 billion by 2015. Chinese companies also remain heavily invested in infrastructural development, and although it may wait to see the outcome of the Indonesia’s presidential elections, Roskill expects that China may leverage its influence to secure the interests of its metal industries by securing additional transitional arrangements.“Despite the effects of Indonesia’s nickel export ban, Roskill remains sceptical that a supply deficit is likely to emerge anywhere prior to 2017/2018. Compared to other metal products, the price elasticity of nickel supply is relatively high, and any increase in nickel prices – particularly from the lows of 2013 – is expected to result in increased output.” Based on estimated industry costs, for instance, an increase in nickel prices from $14,000/t to $16,000/t will restore profitability to some 200,000 t/y of nickel capacity, compounded by parallel price-related demand destruction.Roskill’s latest Nickel Market Outlook, published January 2014, provides a more in-depth analysis of the nickel market, its players, and the impact of the export ban and provides an overview of alternative scenarios for long-term price trends in nickel. Roskill forecasts a baseline price of $18,000/t for 2018, with considerable upwards potential if the nickel ban is maintained in its current form. Future modifications to Indonesia’s export policy remain a distinct possibility.