Ministry: Three nickel smelters stop operating

Petromindo|Lucky

The Directorate General of Mineral and Coal at the Ministry of Energy and Mineral Resources said that out of the total 13 nickel smelters which have been developed in the country, three have stopped operating due to economic reasons, but not because of the government?s policy of allowing export of low grade nickel ores.

Director General of Mineral and Coal Bambang Gatot Ariyono said in a statement on Wednesday that three nickel smelters are owned by PT Indoferro, PT Bintang Timur Steel in Cilegon, Banten Province, and PT Cahaya Modern Metal Industry in Southeast Sulawesi Province.

According to report received by the directorate at the end of July, the nickel smelter of Cahaya Modern was shut down due to a surge in the price of coking coal since last year. The smelter deployed a blast furnace technology which utilizes coke as raw material, and which accounted for about 40 percent of total production cost. Price of coking coal surged from US$100 per ton in 2015 to $200-300 per ton in 2016.

Meanwhile, the statement said that the smelters of Indoferro and Bintang Timur were initially not designed to process nickel ores, thus affecting the economics of the smelters. Indoferro?s smelter was initially designed to process iron ores, while Bintang Timur?s to process manganese ores.

Indoferro?s smelter has output capacity of 200,000 tons per year, which started production since July 2017, while Bintang Timur?s has output capacity of 37,440 tons per year, which was commissioned in July 2015 but has failed to operate continuously.

Elsewhere, the directorate said that the 10 operating nickel smelters have total production capacity of 1.47 million tons per year.

It said that 13 other nickel smelters are currently under construction stage, with combined production capacity of 1.85 million tons per year.

The directorate said that out of the target to build four smelters this year, two have been completed in the first-half. It did not say the type of smelters completed.

In terms of export of low grade nickel ores, the directorate said that out of the total export quota of 8.16 million tons, only about 403,000 tons have been exported as per end June of this year.

The government introduced a policy earlier this year allowing the export of low grade nickel ores with purity of less than 1.7 percent and washed bauxite with purity of less than 42 percent. The AP3I smelters industry association has said that the export policy has undermined nickel price in the international market, and forced some smelters to be shut down due to the falling price of the commodity.

Bambang said that the export quota is given as incentives for miners which have strong commitment to develop domestic smelters. If they fail to make progress in the construction of the promised smelters, their export permit will be revoked.

In a related development, Russian-based miner PT Blackspace said it is pressing ahead with ferronickel smelters in Indonesia, suggesting that the government?s policy to allow export of low grade nickel ores has not affected its investment plan.

Blackspace Director Yoseph Paskananda that two potlines at its smelter project in Kabaena, Southeast Sulawesi, have started commissioning, and the company is constructing 10 other lines. The lines are targeted to start operation in March of next year, each producing 350,000 tons of ferronickel per year. He added that Blackspace plans similar project in Morowali, Central Sulawesi, with 52 potlines, with an expected annual output of 1.3 million tons.

He said that with efficient operation, the company can still make profit even if nickel price tumbles to $7,000 per ton.

Meanwhile, Ramli Halim, Director of PT Macika Mineral Industri said that the company did not stopped operating its ferronickel smelter in South Konawe, Southeast Sulawesi, but merely postponing it from the initial schedule of first quarter of last year due to falling price of nickel.

He said that the drop in nickel price was not due to the government policy of allowing the export of low grade nickel ores as the price of the commodity has tumbled since last year, and that the export volume from the country was small.

He said that the company is still assessing as to when it would start operating the smelter, which will depend on the price of nickel in the international market.

Nickel price stood at $10,275 per ton on Wednesday, according to LME, higher than $8,275 in March.

Editing by Reiner Simanjuntak