* China firms to build metal smelters in Indonesia
* Need metallurgical coke to churn out nickel pig iron
* Jakarta’s ban on ore exports makes need for smelters more-pressing
* Underlines how Indonesia export ban is changing flow of commodities
By Polly Yam and Fayen Wong
HONG KONG/SHANGHAI, Jan 30 (Reuters) - Indonesia’s ban on exports of unprocessed metal ores will boost Chinese shipments of metallurgical coke by as much as 2 million tonnes a year to smelters being built in the Southeast Asian nation.
In particular, China will supply coke to its firms constructing plants in Indonesia to make nickel pig iron, a substitute for higher grade refined nickel in stainless steel.
The increased shipments underline how Jakarta’s drive to transform Southeast Asia’s biggest economy into a producer of finished goods, rather than simply a supplier of raw materials, is changing the flow of commodities in the region.
A surge by as much as 2 million tonnes annually as new smelters come online in the next few years, according to Reuters calculations, would dwarf last year’s 47,000 tonnes.
That growth would provide fresh impetus to China’s overall coke exports, which customs data showed tripled to around 4.67 million tonnes in 2013 after Beijing around a year ago scrapped a 40-percent tax and quota system on shipments of the material.
“The amount of coke going to Indonesia will rise a lot and domestic coke prices will certainly climb,” said a manager at a Chinese smelter of nickel pig iron, who declined to be named or name her company.
Analysts though said that any rise in Chinese prices would probably be mild due to a supply surplus in the country.
The smelter manager added that her firm would complete a nickel pig iron plant with blast furnaces in Indonesia in the fourth quarter of 2014 and would start exporting coke to the unit in the second half due to low Chinese prices.
Indonesia provided 58 percent of China’s 71.3 million tonnes of nickel ore and concentrate imports in 2013, but such shipments have ground to a halt since the ban on ore exports kicked in earlier this month.
Metallurgical coke is used as a fuel and reducing agent in blast furnaces, as part of the process of making steel or iron alloys.
Seven Chinese companies plan to build smelters in Indonesia with capacity to provide nickel pig iron containing about 200,000 tonnes of metal each year, said Xu Aidong, chief analyst at state-backed research firm Antaike.
The amount of metal in nickel pig iron differs, with 4-percent content being used in China for the 200 grade of stainless steel, mostly for home appliance and kitchenware.
That 200,000 tonnes of capacity could see 5 million tonnes of nickel pig iron output based on 4-percent metal content, consuming around 2.25 million of tonnes of coke. That is based on 0.45 tonne of coke being used to make a tonne of pig iron, as is currently the case in China.
Customs data shows that the No.1 buyer of Chinese coke in 2013 was India, with 1.68 million tonnes. China’s overall coke exports last year accounted for around just 1 percent of the country’s total output.
And non-Chinese companies operating in Indonesia could also ramp up purchases of Chinese coke. A South Korean firm in December 2013 shipped 5,000 tonnes of coke from China to its nickel pig iron plant in Indonesia, the manager said.
Chinese prices for spot metallurgical coke currently stand at about 1,300 yuan ($210) per tonne versus 2013-lows of about 1,200 yuan, according to Umetal.com, which specializes in metals information and data in China.
Analysts stressed that while prices would probably climb this year, any increase would be limited due to the domestic surplus. China consumed more than 319 million tonnes of metallurgical coke in 2013 compared to production of 476 million tonnes, Umetal figures showed. ($1 = 6.0508 Chinese yuan) (Editing by Joseph Radford)