• The Indonesian Nickel Indices provide a transparent and new benchmark for global nickel markets.
  • The indices reflect the supply and demand dynamics in Indonesia, which dominates global supply.
  • The new indices may benefit Bindura Nickel Corp and other miners outside Indonesia, providing better insight into price trends and improved bargaining power with offtakers.
Harare- Since last March 2022, when the London Metal Exchange (LME) suspended nickel trading for more than a week after prices erupted in a record-breaking surge, many consumers, producers and traders have been looking for an alternative benchmark for nickel prices. The Indonesian Nickel Indices plan launched in June 2022 and expected to go live later this month would be the solution and benefit nickel miners around the world, including Bindura Nickel Corporation in Zimbabwe. 
 
Indonesia is the world’s largest nickel producer, accounting for about 26% of global supply. The country banned nickel ore exports at the start of 2020 to support its domestic smelting industry. The Indonesia Commodity and Derivatives Exchange (ICDX), in partnership with the Shanghai Futures Exchange (SHFE), have now launched nickel indices based on the physical nickel price in Indonesia. According to Reuters, an exclusive deal that will lead to the development and marketing of indices for Indonesian nickel, signed by UK-based Global Commodities Holdings Limited (GCHL), could change the landscape for referencing nickel prices.
 
The new indices provide more transparency and price discovery for global nickel markets. They reflect the supply and demand dynamics in Indonesia, which heavily influence the global nickel industry. The indices are based on surveys of producers, exporters, importers, and end-users in the country. They take into account factors like the grade of ore and whether it is high-grade nickel pig iron or nickel ferronickel.
 
For Bindura Nickel Corp and other miners outside Indonesia, the new indices could give better insight into price trends and improve their bargaining power with offtakers. Bindura Nickel Corporation is Zimbabwe’s only integrated nickel mining and smelting company. It has operated for over 50 years, producing nickel, copper, cobalt, and palladium. Despite its longevity, Bindura has faced many challenges in recent years, including liquidity troubles, aging infrastructure, and global declines in metal prices.
 
The Indonesian nickel indices could provide more transparency and better prices for Bindura’s nickel concentrate product. They may also boost investor interest in the company and nickel mining sector in Zimbabwe as a whole. Zimbabwe has the second largest nickel reserves in the world, estimated at around 19 million tonnes. However, only 10% of this has been exploited so far, according to Zimbabwe's mining ministry.
According to Analysts at Equity Axis, improved prices and new investments could help revitalize Bindura Nickel Corporation operations, increase production at its Trojan mine, and potentially enable expansion into other deposits. This could position Bindura and Zimbabwe's nickel sector to meet increasing global demand for nickel in the production of stainless steel and lithium-ion batteries.
 
Indonesia is a dominant player in the Nickel supply matrix globally. It's a makert maker, and any policy decisions it implements around Nickel production affects the global price of the metal.  An example is the 2014-15 ban on unprocessed ore, which led to a price recovery. BNC is a price taker, and any maneuvers that potentially tighten demand increases its revenue and profitability given better realized prices. 
 
However, the company has been facing challenges with production given equipment challenges, and this has not yet been fully resolved. Further, the company is now pursuing a low-grade high volume strategy, which impacts margins and could undercut the benefits of firming global prices. The general demand for nickel over the long term will also depend on global developments in the EVs
 
In summary, the new Indonesian nickel indices provide an alternative benchmark that reflects the physical nickel market in Indonesia, which dominates global supply. They could benefit nickel producers around the world, including Bindura Nickel Corp in Zimbabwe. By enabling better pricing, increased transparency, and new investments, the indices may help catapult Bindura and Zimbabwe's nickel mining industry onto the global stage.
 
Commodities Perspective Corner is a weekly publication focusing on general commodities from Agriculture, Energy to Metals. The column seeks to highlight global developments narrowing down their impact on the local economy and vice versa.
 
Equity Axis News