November 1, 2012 / 9:44 AM / 8 years ago

Indonesia's first nickel pig iron smelter starts output

JAKARTA, Nov 1 (Reuters) - Indonesia’s first nickel pig iron smelter has begun initial production of about 1,000 tonnes of ingots a day, kicking off a wave of new metal processing plants planned in the next few years.

Indonesia, the world’s top exporter of nickel ore, slapped an export tax this year on raw mineral exports ahead of a total ban from 2014, prompting firms to announce numerous new smelter projects and billions in investment to meet the rules.

The Indoferro smelter, the first of its kind outside China, aims to produce more than 250,000 tonnes of nickel pig iron (NPI) in 2013, Indoferro business development manager Jonatan Handojo said.

The firm is starting exports to Taiwan, India and South Korea as it aims to tap regional demand to make stainless steel. Nickel pig iron, which typically has low nickel content but is high in iron, is a feedstock for stainless steel mills in China.

“This is a big opportunity,” said Handojo. “We adopted the technology from China,” he said at the plant, which took Chinese workers three years to build at a cost of $150 million.

Indonesia is the top supplier of nickel laterite ore to China, but its new rules on processing in May have curbed exports since, sending hundreds of small miners out of business and driving some Chinese buyers to look to the Philippines instead.

Before the Indoferro smelter, Indonesia, one of the world’s top metal ore producers, only had one copper and one aluminium smelter. That is set to change with Chinese, Indian, Middle Eastern, Russian and local firms planning smelters.

The Indonesian government wants to push miners to process raw ores domestically to export higher-value finished metals, as it seeks to become a top ten world economy.

The nickel pig iron produced at the Indoferro plant, in the coastal city of Cilegon in the west of Java island, has a nickel content of around 2.4 percent, Handojo said, meaning output next year will reach 6,000 tonnes of nickel contained in the NPI.

This compares to around 275,000 tonnes of nickel contained in NPI from top producer China in 2011, according to Macquarie.

Indoferro aims to increase the nickel content to 3.2 percent. It also plans to increase NPI production to 500,000 tonnes by building a second blast furnace in 2014 at the plant, a giant structure of steel and pipes where signs are in Mandarin as well as English.

Indoferro had hoped Germany would also be a key customer, but European stainless steel producers have shown weak demand, driving down nickel prices 13 percent this year. Nickel has been the worst performer among base and precious metals.

“We are in a good position here. The global price of nickel has dropped but the raw material I buy from miners has also dropped so we don’t have a problem,” Handoko said. (Editing by Neil Chatterjee and Clarence Fernandez)

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