Indonesia expects $1-bln nickel pig iron plant to start in 2014

JAKARTA, April 29 Mon Apr 29, 2013 12:18am EDT

JAKARTA, April 29 (Reuters) - Indonesia expects the first stage of a $1-billion nickel pig iron smelter being built by PT Sulawesi Mining Investment in Central Sulawesi to start operations by the end of 2014, the industry ministry said.

Indonesia, the world's top exporter of nickel ore, is pushing mining companies to add more value within the country, and will not allow unprocessed mineral exports after January 2014.

The rule has been widely criticized by miners, who say building smelters is not a viable option for all the metal ores Indonesia exports.

Benchmark nickel prices have lost around 11 percent this year, last week hitting their lowest in almost four years near $15,000 a tonne, as global supply outpaces demand, and slower growth forecasts have dimmed longer-term prospects.

On Monday, nickel stood at $15,250 a tonne by 0354 GMT.

The first stage of the smelter being built by SMI, a joint venture between Indonesia's PT Bintang Delapan Group and China's Tsingshan Group, is 30 percent complete, the ministry said in a statement, quoting Alexander Barus, Vice President Director of PT Bintang Delapan Mineral.

"Our current investment has reached $100 million from the total investment (including the second-stage investment) of $ 1.06 billion," said.

Total investment for the first stage of the project is $320 million, with expected production of 300,000 tonnes of nickel pig iron each year, most of which will be exported to China.

The second stage of the project, expected to cost another $640 million, will begin in July 2013 and will add another 500,000 tonnes to the plant's nickel pig iron output, as well as a 450-MW power plant. Eventually the firm expects to produce stainless steel at the plant, Barus said.

The SMI plant will be among the first nickel pig iron smelters outside China, Indonesia's top customer for nickel laterite ore. The Indoferro smelter that started last year aimed to produce 250,000 tonnes of NPI in 2013.

SMI was not immediately available for comment.

(Reporting by Yayat Supriatna; Writing by Fergus Jensen; Editing by Clarence Fernandez)