Chinese inventories of medium-to-high grade nickel are likely to drop below 10 million tonnes by the end of the first quarter of 2015, as the monsoon continues to hamper Philippine nickel ore exports, according to investment bank Macquarie.

The first fortnight of December has seen further nickel ore destocking in China, with stock at major Chinese ports down 490,000t to 14.7mt as of 12 December. Macquarie sees stocks of 12-13mt in mid-December.

Among the port stock, around 7.5mt is high-grade nickel ore, with Indonesian-origin ore comprising under 80%. “At current production [rates] for nickel pig iron, the medium-to-high grade nickel ore inventory is equivalent to no more than 4.5 months of use, and the Indonesia high-grade ore is only enough for a maximum of three months of consumption,” Macquarie says in a statement sent to Kallanish.

Last month Indonesia – the nickel ore source of around 30% of global nickel production – reaffirmed its nickel ore export ban, initially implemented in January 2014. Nickel for delivery in three months on the London Metal Exchange surpassed $16,800/tonne in the first week of December before dropping back, and is at $16,715/t on 16 December.

Credit rating agency Moody’s said last month it sees the continuation in Q1 of accelerated nickel restocking from market players trying to anticipate further price increases (see Kallanish 20 November). The Indonesian ban has eroded much of the price/cost advantage of Chinese stainless steelmakers. Philippine-origin nickel ore has filled in some supply gaps, but market sources expect further shortages in 2015.