SINGAPORE/JAKARTA -- Stocks in nickel-producing companies plunged in Asian markets Friday after Jakarta announced it would ease an export ban on nickel ore, as investors anticipated a price drop from the increased supply.
Indonesia's energy and mineral resource ministry announced Thursday it would allow exports of nickel ore -- used in stainless steel -- and bauxite for five years under certain conditions. Low-grade ore, defined as below 1.7% nickel, can be exported as long as a certain portion is smelted at home.
The sell-off began as soon as markets opened Friday. Shares of Vale Indonesia, a Jakarta Stock Exchange-listed unit of Brazilian mining giant Vale, dove more than 15% on the day to a five-month low of below 2,500 rupiah (19 cents).
Foreign companies felt the pain as well. Philippine nickel producer Nickel Asia, listed on the Philippine Stock Exchange, saw prices slump more than 10% at one point. Australian miner Western Areas, on the Australian Securities Exchange, plummeted nearly 20%. Similarly, Japan's Sumitomo Metal Mining temporarily fell by nearly 8% on the first section of the Tokyo Stock Exchange.
Indonesia was among the world's leading nickel ore producers before it imposed the export ban in January 2014, a move aimed at to fostering its smelting industry. Some predicted the ban would be short-lived, but that has not been the case. This and other factors such as tightened environmental restrictions in the Philippines contributed to a 2016 nickel shortage, the first in six years.
State-run nonferrous metals company Aneka Tambang Persero, meanwhile, is poised to benefit from the government's move. Investors snapped up shares in the JSE-listed company from the early morning, driving prices up more than 5% at one point. The company largely exports unprocessed nickel ore, and was hobbled by the export ban, whose easing is likely to provide a tailwind.
Jakarta is relaxing the ban in order to boost government revenue and improve hiring, explains Ignasius Jonan, Indonesia's energy and mineral resource minister. The government may have intended to drive up stock prices for a state-run company, but if nickel prices fall more than anticipated, its move could backfire.