JAKARTA/MELBOURNE, Oct 14 (Reuters) - A unit of China steel producer Tsingshan Group is set to triple its capacity to produce nickel pig iron in Indonesia as soon as May, an executive said, as the Southeast Asian nation pushes to win more profit from its mineral wealth.
Chinese stainless steel mills often feed nickel pig iron into furnaces to strengthen their product as a cheaper alternative to refined nickel.
That means increased Indonesian nickel pig iron output could help pour cold water on remaining hopes for international nickel prices to climb off six-year lows.
“By May next year, we’ll have an installed capacity of 900,000 tonnes of nickel pig iron,” Tsingshan Bintangdelapan Group CEO Alexander Barus said in an interview late last week.
The expansion of its facility on the island of Sulawesi will make the company the country’s top producer of the nickel iron feed. The plant has been operating at 60-70 percent of its current capacity of 300,000 tonnes, said Barus.
The firm is developing three smelters at the site, which once completed will have a combined annual output capacity of 1.2 million tonnes of nickel pig iron, containing 120,000 tonnes of nickel. The group expects all three smelters to be completed by June 2017. Other stakeholders include Hanwa Co Ltd of Japan.
Output from the plant has already driven the Southeast Asian nation to become the top supplier of the feed to China’s vast stainless steel sector in the wake of a ban on exporting mineral ores that kicked in at the start of last year.
Indonesia had previously shipped nickel ore to Chinese steelmakers, which used it to make their own nickel pig iron.
Growing smelting capacity is a rare piece of good news for President Joko Widodo who has been struggling with faltering economic growth and political infighting since taking power last year, as his government has prioritised a drive to win bigger returns from Indonesia’s mineral resources.
While the ban was intended to boost Indonesia’s profits from its mineral wealth, miners and analysts had doubted the viability of developing downstream mineral processing facilities.
Barus said the timetable for expanding the project had not been changed due to the low nickel prices, which this week stood around $10,400 per tonne. He expects price to recover to $12,000-13,000 in the next six months as the global economy revives.
“We are producing at a loss now, but this is the way you arrive at an area where in the future you are going to be competitive,” he said.
“For the time being we are sticking to our schedule.” (Reporting by Fergus Jensen and Melanie Burton; Editing by Joseph Radford)