Indonesia's plan to ban exports of unrefined nickel and other minerals could drive up shipping costs as Chinese importers seek new supplies from more distant sources such as Australia and New Caledonia. 

 

China typically buys most of its nickel ore from the Southeast nation, which plans to force mining companies from January to process raw metals before shipping them overseas as part of a drive to boost the value of exports.

 

"If there is a shift to other sources that have a greater tonne-mile impact it will be very positive for the market," said Khalid Hashim, managing director of Precious Shipping, one of Thailand's largest dry cargo owners.

 

Charter rates for ships carrying dry bulk cargoes such as nickel ore and bauxite to Chinafrom Indonesia have already soared more than 50 per cent from late August to early December after Beijing boosted imports ahead of the planned ban, shipping data showed.The French South Pacific territory of New Caledonia, Australia, Russia and the Philippines could boost nickel ore exports to fill the gap left by the Indonesian ban, said Jayendu Krishna, senior manager at Drewry Maritime Services.

 

Greater Chinese imports from Australia, New Caledonia and Russia would benefit smaller dry bulk vessels such as handysize and supramax ships of between 28,000-60,000 deadweight tonnes (dwt). But the Philippines is closer to China than Indonesia.

 

WILL IT STICK?

 

Chinese imports of nickel ore, used to make stainless steel, in the first 10 months of 2013 rose 18 percent from the year before to 57 million tonnes, with around 31.3 million fromIndonesia and 25.3 million tonnes from the Philippines, China customs figures showed.

 

"Indonesia is the No.1 exporting nation with about 55 million tonnes of exports expected for 2013," said Peter Sand, chief shipping analyst at shipping trade body BIMCO. That compares with 48.5 million tonnes last year, according to data from GTIS and consultancy Drewry Maritime Research.

But some market participants question whether the ban by Indonesia, the world's top exporter of nickel ore, will last.

 

Major miner Freeport McMoRan Copper & Gold has warned that the ban could cost Southeast Asia's biggest economy $1.6 billion in lost revenue next year.

 

"This is not the first time Indonesia has threatened (a ban)," said Ian Claxton, managing director of Thai dry bulk owner Thoresen & Co (Bangkok). "(But) in the event the ban should stick then alternative sources need to be found. This will increase tonne mile demand, not a bad thing for supramaxes."

 

Supramax charter rates between Indonesia and China topped $10,400 per day on Dec. 6 compared with a daily average of $6,171 in 2013, according to data from Clarkson Research Services, a unit of the British ship broking house.

A nickel ore export ban would make shipping safer as Indonesian ore is especially prone to liquefaction as it is loaded in remote areas where facilities to check moisture content are not available, said Hashim at Precious Shipping.

 

Some 81 seamen were killed in five incidents between October 2010 and February 2012 where ships capsized and sank after their nickel ore cargoes liquefied, said shipping insurer the American P&I Club.