Indonesian policy could affect stainless scrap prices

The government of Indonesia reportedly is tightening its control over outbound shipments of lower grade nickel-bearing products, including nickel pig iron (NPI), which competes with stainless steel scrap as feedstock at melt shops around the world.

A mid-February news report by the Associated Press (AP) describes Indonesia as the world’s largest exporter of nickel ores and semi-finished nickel and says its government “hoped that control over nickel would underpin a fully domestic electric vehicle (EV) industry, from mining and batteries to finished cars.”

In the absence of such results, last year Indonesia’s government seized nearly 10 million acres of land and “cracked down on what it called illegal exploitation of natural resources, saying many mining and plantation licenses were tainted by bribery or never properly approved,” according to AP.

While AP and its reporters and contributors Aniruddha Ghosal, Anton L. Delgado and Edna Tarigan concentrate on the policy’s impact and nickel powder and EV battery markets, the move may also have an effect on the stainless steel production sector.

NPI has been invested in and favored by stainless steel producers in the People’s Republic of China and at mills built by Chinese companies in neighboring Asian countries.

That reliance on NPI has put a ceiling on demand for stainless steel scrap in Asia and on recycled stainless steel prices globally.

A nonferrous alloys trader contacted by Recycling Today in February says the crackdown in Indonesia has traders speculating that reductions in NPI availability will increase the demand for stainless steel scrap in Asia, where it has been weak for more than a decade.

In the United States this week, stainless steel prices have been rising from 2 to nearly 4 cents per pound, according to Davis Index, although the news and pricing service cites winter weather transportation interruptions on the supply side as the leading factor.

The AP reporters and analysts they contacted say there are geopolitical aspects to the Indonesian export crackdown, and a prolonged policy “could loosen Beijing’s grip on parts of the supply chain.”

Indonesia’s land seizures could destabilize the nation’s nickel industry, Bhima Yudhistira, with the Jakarta-based Center of Economic and Law Studies tells AP. “This is making the future of nickel, both mining and downstream processing, unknown [and] uncertainty is very costly for investors.”