China may send delegation on metals investments to Indonesia - sources

Thu Feb 20, 2014 4:25am EST

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* Chinese ministries meeting with metals firms investing in Indonesia

* Companies want financing help, information on Indonesian policies

By Polly Yam

HONG KONG, Feb 20 (Reuters) - Beijing is organising a delegation of Chinese companies that have plans to build metals plants in Indonesia, in a first sign the government may be concerned over ore supplies because of the Southeast Asian country's mineral ore export ban.

China's Ministry of Commerce is planning the trip to visit Indonesian government officials to seek clear policies for planned and potential China-led investments, though the timing of the visit has not been decided, industry sources said.

The plan for the trip was revealed in a meeting between companies and government officials last week in Beijing, said two industry sources with direct knowledge of the discussions. They declined to be named because the meeting was private.

Companies in the meeting had asked Beijing to provide support in financing, information on investment conditions after finding it difficult to raise funds for their projects, and help in predicting policies in Indonesia, the sources said.

At the meeting were executives from some thirteen metals companies planning to build ferro-nickel production plants or alumina refineries, along with officials from the Ministry of Commerce, the National Development and Reform Commission and the Ministry of Foreign Affairs, the sources said.

Indonesia was China's top supplier of nickel ores and bauxite, or aluminium ores, in 2013.

Beijing, encouraging big Chinese companies to invest in overseas projects while trying to ease overcapacity in the domestic metals industries, wants to use the Indonesian ban to cut local capacity for nickel pig iron, said one of the sources.

"(The government) expects that the Indonesian ban would help consolidate China's ferro-nickel sector," the source said.

The ban would push up ore prices, forcing ill-financed, small producers to close, the source said.

Indonesian nickel ores are typically used to produce nickel pig iron, a low-grade ferro-nickel in China.

Chinese firms stepped up plans to build plants in Indonesia to produce nickel pig iron after Jakarta banned mineral ore exports in January; firms were more cautious about building alumina refineries due to the size of investment.

China has annual capacity to produce more than one million tonnes of nickel in nickel pig iron. Actual output, though, was less than half a million tonnes of nickel in 2013, according to information provider SMM. (Reporting by Polly Yam; Editing by Tom Hogue)

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