By Zandi Shabalala
LONDON, Aug 30 (Reuters) - Nickel prices soared to five-year highs on Friday after a government official at major producer Indonesia said the country would ban ore exports from December, fanning fears of shrinking supplies and deficits.
Benchmark nickel on the London Metal Exchange (LME) ended 8.8% higher at $17,900 per tonne, its biggest one-day gain since 2009. Prices of the stainless steel ingredient have climbed nearly 70% so far this year, outperforming other base metals.
"The tide is turning and there are a few things behind that. One is the reduced supply of nickel ores from Indonesia followed by the announcement of the export ban from December 2019," said ING analyst Wenyu Yao.
"Depletion of ore and mines closing in the Philippines, supply disruptions in Papua New Guinea and funds adding to long positions are other things behind the nickel price rally."
Long nickel positions on the LME held by investment funds stand at nearly 40,000 lots, their highest since June 2018, according to the Citi LME nickel speculative positioning indicator.
Indonesia's Energy and Mineral Resources Minister Ignasius Jonan signed a new regulation to restrict ore exports, according to a voice recording verified by a ministry spokesman. The original ban on ore exports in 2014 was lifted for certain minerals in 2017 to give miners time to build smelters to process minerals such as nickel, bauxite and copper.
Indonesia now only allows miners to export low-grade nickel.
On the LME market, worries about nearby supplies have been reinforced by one entity holding between 50% and 79% of nickel warrants .
Falling nickel stocks in LME-registered warehouses at 109,950 tonnes, down 20% so far this year, have added to those worries. This can be seen in the premium for the LME's cash nickel over the three-month contract, which rose above $100 a tonne, its highest in more than a decade.
The global nickel market estimated at 14 million tonnes has been in deficit for some years now and expectations were for a more balanced market next year.
The International Nickel Study Group (INSG), which so far this year shows a narrower deficit than last year, expects a shortage of 84,000 tonnes in 2019. Adding to supply concerns was a waste spill from a nickel plant in Papua New Guinea which raised fears of a shutdown and plans by African Rainbow Minerals to shutter its loss-making nickel mine in South Africa. In other metals, copper closed 0.8% lower at $5,680 per tonne, aluminium was flat at $1,743, zinc fell 2.6% to its lowest since August 2016 at $2,209.
Lead shed 2.1% to $2,017, while tin jumped 3.5% to $16,350.
(Additional reporting by Pratima Desai; editing by David Evans and Emelia Sithole-Matarise)
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