Nickel makes gains on Indonesia ban Nickel made further gains on Tuesday as market participants continued to assess the impact of Indonesia's ban on exports of unprocessed mineral ore. Nickel for delivery in three months on the London Metal Exchange rose as much as 1.3 per cent to $14,400 a tonne, extending gains since the start of the year to more than 7 per cent. Indonesia is the world's biggest exporter of nickel and the leading supplier to China. Its high grade laterite nickel is used by Chinese mills to produce nickel pig iron, a cheaper alternative for making stainless steel. Some analysts have attempted to play down the significance of the ban because China has been stockpiling ore. Chinese buyers are estimated to have purchased about 32m tonnes of ore, which is equivalent to a year's production. But, according to Macquarie, the Chinese stocks are partly held by traders who are likely to mark up the price of the ore, which could have a positive knock-on effect for the refined nickel market. "We would not rule out a potential 50 per cent increase in prices, which would lift the break-even for (rotary kiln - electric furnace) nickel pig iron from $12,000 to $15,000," the bank said in a report." Given this supply source is required for the market, refined nickel prices would have to rise in order to pass this through. Other base metals were also in demand on Tuesday. Lead for three-month delivery on the LME rose 0.5 per cent to $2,187.50 a tonne, while zinc added 0.1 per cent to $2,071 a tonne. The exceptions were copper and aluminium, which fell 0.45 per cent to $7,290 a tonne and 0.9 per cent to $1,762.50 a tonne respectively. A range of exemptions mean copper is unlikely to be signifcantly affected by the Indonesia export ban, although that view is starting to be challenged by traders. While most producers will be able to export copper concentrate until 2017 they will be subject to escalating taxes that are yet to be clarified but which could reach 60 per cent in two years. Assuming the rumoured figures are true, margins at the country's two biggest copper mines, Grasberg and Batu Hijau, will suffer. This could result in production being cut until downstream facilities - smelters - are completed, say traders. Indonesia accounts for about 3 per cent of global nickel supply, according to Goldman Sachs. The muted performance of the LME aluminium price, meanwhile, was in marked contrast to physical premiums, which hit record highs on Tuesday in Europe, North America and Japan. Premiums - the amount paid on top of the LME price for immediate delivery of metal - reached $310 in Europe. Analysts said the rise could be explained by a combination of factors, including production cuts, continued demand for physical metal in financing deals and a tight scrap market. Eion Dinsmore, senior analyst at CRU, an industry consultant, said industrial consumers who thought premiums would fall in the wake of the LME's proposed new rules on warehousing had been caught on the hop. "Consumers have realised that premiums aren't coming off and now have to buy metal to deliver to customers from the large trading houses," he said.