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An Indonesian nickel producer has for the first time ever applied to have its metal listed as a good delivery brand on the London Metal Exchange .
For many other nickel producers, however, it marks an ominous moment in the transformation of Indonesia’s growing production dominance into exchange pricing power.Stocks booster Rebuilding stocks liquidity is part of the LME’s pathway to restoring confidence in its nickel contract after the suspension of trading two years ago.
But will the LME contract become a market defined by Indonesian metal, or in the case of the newly-listed Chinese brands, metal derived from Indonesian mines?Indonesia’s mined nickel production has jumped from under 800,000 tons in 2020 to 2.03 million tonnes in 2023, when it accounted for 55% of global output.LME three-month nickel is on a bit of a roll right now, up by over 7% on the start of the year at a current $17,590 per ton.
A price of around $18,000 per ton is about right, opens new tab for Indonesia, according to Septian Hario Seto, deputy coordinating minister for the mining sector. It’s high enough to allow most local producers to make a healthy margin but low enough to keep nickel in the electric vehicle battery chemistry mix.
It would risk fracturing the London market again just as it is showing signs of recovery. Moreover, “the LME believes the market for ‘green’ nickel is not yet large enough to support vibrant trading in a dedicated green futures contract.”Producers carrying the extra costs of tight environmental compliance should not be put out of business by those with lower thresholds. There is a strong case that such metal should be priced at a premium.
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