Investment shortfalls cause 30% drop in nickel smelter construction by 2022
- Norman Harsono
The Jakarta Post
PREMIUM
Jakarta / Wed, December 11, 2019 / 03:41 pm
Nickel ore is processed at a PT Vale Indonesia smelting plant. Planned nickel and bauxite smelters will not be finished on schedule because of investment shortfalls.(JP/Ruslan Sangadji)
Less than a month before Indonesia bans the export of raw nickel ore, the Energy and Mineral Resources (ESDM) Ministry has lowered its projections for nickel and bauxite smelter construction by 2022 because of investment shortfalls.
A ministry official said on Dec. 6 that domestic smelters could still absorb domestic metal production, particularly nickel, in 2022, despite lowered smelter input capacity.
“With a combined input capacity of 69 million tons [yearly], our smelters are sufficient for 30 years. That’s already great,” said the ministry’s mineral business development director Yunus Saefulhak.
The Energy Ministry initially expected 41 nickel smelters and 11 bauxite smelters to begin operation by 2022, but due to investment shortfalls, the ministry estimates that only 29 nickel and 9 bauxite facilities will be operational by then. It means that about 30 percent of the smelters currently under construction could not be operated according to initial schedules.
The smelters will process raw nickel and bauxite ore to create refined metals for use in higher-value products such as car batteries, stainless steel and aluminum.
The smelter shortfall has lowered the projected nickel input capacity for 2022 by 28 percent to 69.7 million tons per year. The projected bauxite capacity has fallen 11 percent to 29.6 million tons per year.
"The remaining smelters are still under construction. We evaluated them, and their progress is slow. If they finish, we'll consider it a bonus. Some of them are less than 10 percent complete," said Yunus.
The delay in the completion of the smelters follows an estimated $2.7 billion shortfall in nickel smelter investment and a $0.7 billion shortfall in bauxite smelter investment. The ministry had expected investments to reach $10.30 billion and $8.64 billion by 2022 respectively.
“[The investment shortfall] is because of constantly changing Energy Ministry regulations. Many of the investors who had contacted the BKPM (Investment Coordinating Board) pulled out,” Indonesian Smelter Association (AP3I) deputy chairman Jonathan Handoyo told
The Jakarta Post on Sunday.
The Energy Ministry has changed the nickel ore export ban date three times since 2014 and has changed the bauxite ore export ban date once in the same time period.
“At the moment, many smelters are funded by foreign companies. And with the current nickel prices and market conditions, funding remains a challenge that needs to be addressed,” said Vivek Lath, an associate partner at business consultancy McKinsey & Company.
Despite the challenges, Yunus said, domestic smelters could still absorb domestic metal production, particularly nickel, starting in 2022.
According to ministry data, Indonesia produced 44.5 million tons of nickel last year, of which 45 percent was exported and 55 percent was consumed locally. Last year’s production volume was greater than the country’s existing nickel ore input capacity (24.5 million tons from 11 smelters) but lower than the capacity projected by 2022 (69.7 million tons).
Changes to mining policy in Indonesia, which produced a quarter of the world’s nickel last year, often affect the world price of nickel. For example, nickel prices rose 1.2 percent to $16,980 per ton on the London Metal Exchange (LME) on Oct. 28, when BKPM head Bahlil Lahadalia unexpectedly and inaccurately announced that "nickel associations" had agreed to stop exporting raw nickel ore effective immediately.
Indonesia also contributed 2.36 percent of the 300,000 tons of bauxite produced last year worldwide, according to the latest US Geological Survey.
Commenting on how Indonesia’s nickel ban will affect the global market, Lath said ; “In the medium term, potential ore exports from the Philippines [the world’s second-biggest nickel ore exporter] and New Caledonia can ensure a stable supply.”
In the long term, an increase in prices and the growth of nickel demand for electric car batteries will continue to incentivize miners in Indonesia to develop High Pressure Acid Leaching (HPAL) smelters, he said.
Even though nickel and bauxite smelters face shortfalls, the Energy Ministry expects the construction of iron, copper, manganese, lead, zinc and anode mud smelters to proceed as planned. Such smelters are expected to have a combined capacity of 12.87 million tons per year and raise $1.44 billion in investment by 2022.
https://www.thejakartapost.com/news...p-in-nickel-smelter-construction-by-2022.html
