China’s imports of nickel ore in 2014 declined 33 percent to 47.76 million metric tons according to the General Administration of Customs. In China this ore is used to make nickel pig iron, which is a cheaper alternative to refined metal used in the stainless steel production.

China’s gross domestic product (GDP) growth touched a 24-year low in 2014 at 7.4 percent (y/y), slightly below the government target (7.5 percent). Slowing growth was primarily caused by the country’s cooling property market, collapsing credit, and surging bad loans. Meanwhile, forecasts about future economic growth are gloomy. The International Monetary Fund (IMF) estimates that the economy of China will expand 6.3 percent only in 2015 amid the weak property market and high funding costs. Slowing economic growth translates into slowing demand for commodities and other products from the world’s second-largest economy (and which impacts on the export performance of China’s trading partners including Indonesia).

Secondly, the export ban for unprocessed minerals, introduced by the Indonesian government in January 2014 (as part of Law 4/2009 on Mineral and Coal Mining), seriously tightened global supply of nickel ore. Through this new law the Indonesian government seeks more state income from the domestic mining sector as well as taking a more protectionist approach regarding its natural resources. This initially caused nickel prices to soar to the highest level in over two years but soon declined again on speculation that demand from China was weakening amid its sluggish economy.

Thirdly, monsoon rains in the Philippines resulted in lower nickel ore output and curbed seaborne trade. After implementation of Indonesia’s export ban, the Philippines became the largest supplier of nickel ore to China.