Tsingshan, partners face cost hike at Indonesia battery chemicals plant - sources

* Cost of battery chemicals plant may swell, say sources

* Price tag could reach as much as $1.5 bln - sources

* Initial estimate may see slight adjustment - GEM official

* Auto industry watch project in shift to electric cars

LONDON/SINGAPORE, July 5 (Reuters) - Tsingshan and other firms investing in an electric vehicle battery chemical plant in Indonesia will have to pay significantly more than a $700 million price tag estimated last year, three sources familiar with the matter said.

Auto makers are watching the project and others like it in Indonesia closely as they will eventually provide large amounts of the chemicals used to make the lithium-ion rechargeable batteries for electric vehicles.

Work on the plant to produce nickel, cobalt and manganese chemicals used for battery cathodes started in January. The plant is expected to be completed next year.

Chinese battery firm GEM said in September it was teaming up with others including Indonesia’s stainless steel producer Tsingshan Holding Group on the plan, initially estimating the project would cost $700 million.

But sources say the price tag may be $1 billion or more.

A GEM official said there could be minor adjustments.

“The project is in progress. The investment may be slightly adjusted if we need more equipment or something else,” Rao Mingyu, an investment assistant at GEM, said of the $700 million estimate.

The plan is to build the 50,000-tonne high-pressure acid leach (HPAL) facility at Tsingshan’s industrial park in Morowali, on the Indonesian island of Sulawesi.

A source at one of the partners said the latest cost estimate for the plant was around $1 billion, adding that project details and costing were still being worked out.

Another source familiar with the matter put the cost higher still, adding: “The estimate they gave last year may have been a partial estimate. It has been revised up to $1.5 billion.”

A GEM spokesman said the $1.5 billion figure was not correct. Tsingshan referred questions on the project to GEM.

The consortium includes Guangdong Brunp Recycling Technologya, a unit of Chinese battery maker Contemporary Amperex Technology Ltd (CATL), and Japanese trading house Hanwa.

CATL did not respond to requests for comment and Hanwa declined to comment.

“There were complications with the original number. It may be to do with the idea the hydroxides produced by Tsingshan would be shipped back to China to be turned into chemicals,” a source familiar with the matter said of the $700 million figure.

“It normally takes four years to build one of these plants, the source said but two years is feasible, particularly as Tsingshan is involved,” the source added.

Tsingshan’s success in ramping up nickel pig-iron (NPI) production in Indonesia has led the market to think the top producer could repeat that in chemicals.

Sources said the Morowali plant would cost less than previous HPAL plants because the infrastructure such as port facilities, roads and power plants were already built.

A nickel industry source said the $1.5 billion price tag “sounds reasonable as they don’t need to buy the mine, set up a power plant and other infrastructure.”

But analysts say most HPAL projects have taken longer and cost more than originally anticipated, such as the Ambatovy project in Madagascar.

Ambatovy’s website says its project cost $8 billion to set up and will have capacity to produce 60,000 tonnes of nickel. (Reporting by Pratima Desai and Mai Nguyen in Singapore; Additional reporting by Fransiska Nangoy in Jakarta and Yuka Obayashi in Tokyo and Tom Daly in Beijing; Editing by Veronica Brown and Edmund Blair)