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Indonesia nickel mining disrupted by heavy rain, floods -association

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JAKARTA/SINGAPORE, June 14 (Reuters) - Widespread flooding in Indonesia's nickel hub on the island of Sulawesi has halted some mining operations in the world's biggest nickel ore producer, an official with a nickel mining industry group said.


Indonesia is a major supplier of nickel ore and nickel pig iron to China, the world's largest producer of stainless steel, an industry that accounts for 70% of global nickel consumption. A protracted disruption in Indonesia could have a significant impact on raw materials for stainless steel production.


Heavy rains have been hitting the North Konawe regency in Southeast Sulawesi since late last month, flooding some mines and resulting in high water content in output from others, Meidy Lengkey, secretary general of Indonesia's Nickel Miners Association, told Reuters.


"A number of mines haven't been able to operate in the past two weeks," Lengkey said. An estimated 15 to 20 miners who each produce 50,000 to 100,000 tonnes of nickel ore per month, were affected by the flooding, she said.


More than 5,700 people were displaced after high intensity rain in North Konawe region caused a widespread flood, the national disaster mitigation agency said.


The flooding, however, has not disrupted operations and logistics at Indonesia Morowali Industrial Park, a major nickel smelter hub in Central Sulawesi, according to Alexander Barus, an executive at the park.


"We anticipated a heavy rainy season, but this one is bigger and more widespread than usual," Barus said.


Many of Indonesia's nickel mines are spread around Central, South and Southeast Sulawesi provinces. The Morowali Industrial Park is where China's Tsingshan Group makes stainless steel.


Morowali was also affected by floods, but the worst hit area was just to the south of there, in North Konawe regency.


FUTURES PRICES JUMP


Nickel prices jumped to two-week highs on Friday on fears of further supply disruptions.


Benchmark nickel on the London Metal Exchange (LME) on Friday rose as much as 1.9% to a two-week high of $12,065 a tonne, while Shanghai nickel climbed 3% to its highest since May 28 at 101,360 yuan ($14,640) a tonne. Short positions on Shanghai July nickel have been squeezed by the increase, with the market just needing "an incident to make prices fall," said a China-based nickel analyst.


Nickel futures have been under pressure and are likely to remain so this year on rapidly rising nickel supplies and slowing demand from stainless steel mills, which have been erasing deficits in the nickel stockpile balance. Another major influence this year has been the trade dispute between the United States and China, the world's two largest economies, with its potential to disrupt growth and demand. Benchmark LME nickel has fallen about 25% in the last 12 months.


"We remain bearish about near term nickel prices in view of weak stainless steel demand especially in China," said analyst Helen Lau of Argonaut Securities in a note.


The Southeast Sulawesi disaster mitigation agency said on Friday that water has receded in some areas in North Konawe, although some villages were still difficult to access.


($1 = 6.9233 yuan)


(Reporting by Bernadette Christina Munthe and Fransiska Nangoy in JAKARTA and Mai Nguyen in SINGAPORE; Editing by Tom Hogue)

Messaging: mai.nguyen.thomsonreuters.com@reuters.net))
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