Vale Indonesia on lookout for smelter development partner

Petromindo|Lucky

Major nickel producer IDX-listed PT Vale Indonesia Tbk is on the lookout for a partner willing to develop a US$2 billion ferronickel smelter in Pomalaa, Southeast Sulawesi, The Jakarta Post reported on Friday.

The paper quoted Vale Indonesia president director Nico Kanter as saying that the company was currently conducting feasibility studies on the smelter, which may take four five years to develop, and was also accepting partnership offers from both international and domestic companies, IDX-listed diversified miner PT Aneka Tambang (Antam) Tbk.

However, he cited particular interest by Chinese companies because of the high demand for processed products and also cheap but effective smelter technology.

?Right now we?ve had offers come in and we?re reviewing their feasibility. Furthermore, we?re open to Chinese technology. We used to believe that our own technology was the best, but it?s very expensive. Now we?re more often seeing successes from companies like Tsingshan [Group],? Nico said on Thursday.

Vale Indonesia is also currently offering a partnership for another smelter in Bahodopi in Central Sulawesi.

Although Nico declined, to disclose the size of share it is offering in the prospective partnership, existing regulations stipulate that a local company must own at least 30 percent of a smelter to be able to continue exporting processed ores.

Vale Indonesia already has a smelter in Sorowako, South Sulawesi, as part of its integrated laterite nickel mining and processing operation.

The Indonesian Smelter Association seems to agree that companies from China have the greatest potential and willingness to partner up with local companies to develop smelters.

?Right now China has the most potential because, first, most of the demand comes from China, right? That?s a huge point,? chairman R. Sukhyar told The Post, adding that Japanese companies also had a lot of potential.

Meanwhile, Nico said the company was also looking to boost production Lion to 90,000 tons next year ?as stipulated in our contract?.

In the third quarter, the government recorded a 1 percent year-on-year decline in production to 58,000 tons. The company has set a production target of 80,000 tons this year, but is also expecting a slight shortfall due to technical issues in one of its electric furnaces.

Furthermore, in the January-September period this year, Vale Indonesia?s revenue dropped 33.8 percent to $405.46 million from $613.13 million the previous year.

Even so, Nico was optimistic about next year?s outlook, especially since nickel prices have risen slightly after a long period of sluggish prices.

Nickel prices have risen slightly as a result of a drop in global nickel supplies caused by the shutdown of several mines and factories because of a lack of economic feasibility.

Furthermore, global prices may be slightly boosted by the shutdown of almost a quarter of mines in the Philippines because of concerns over the environment. The Philippines is the largest supplier of nickel to China.

However, Nico warned that global nickel prices might head downward once more if the Indonesian government decided to relax an impending mineral ore export ban next year.

?The government?s policies are very influential because we hold 30 percent of the global nickel market. This means that any policy issued by the government will affect the world,? he said. (*)