March 26, 2012 / 4:06 PM / in 6 years

Sumitomo eyes New Caledonia, Philippines for nickel

TOKYO (Reuters) - Sumitomo Metal Mining Co (5713.T) is looking to increase nickel supplies from New Caledonia, the Philippines and the Solomon Islands to make up for a shortage expected to hit Japan once Indonesia bans unprocessed nickel exports from 2014.

Japan gets more than half its nickel supply from Indonesia and its top two ferro-nickel producers, Sumitomo Metal Mining and unlisted Pacific Metals Co, are expected to take a major hit from Indonesia’s new 2014 export law.

“We are talking with the Indonesian government if it’s possible to export what it cannot process at home,” Nobu Kemori, president of Sumitomo Metal Mining, told Reuters in an interview.

“We believe that possibility is not low given a lack of smelter capacity in Indonesia, costs and time involved in building new smelters, including facilities such as power plants. But at the same time we are looking to increase supply from New Caledonia, the Philippines and the Solomons.”

Indonesia has said it will ban shipments of some unprocessed metals - copper, gold, tin, nickel, among others - from 2014 to improve domestic metal production capacity, boost supplies of refined products to the domestic market and increase government revenue.

Indonesia’s ban on exports could lead to a scramble by global consumers for minerals from elsewhere, with the shrinking supply outlook ultimately supporting benchmark prices.

Kemori said the firm’s 62.5 percent-owned Taganito nickel project in the Philippines will start production in July or August 2013, with output in 2014 seen reaching at least 27,000 metric tonnes (29,762 tons), or 90 percent of its capacity.

An attack by Maoist rebels late last year has pushed back the launch of the project valued at more than $1 billion by a couple of months and raised the cost by some $100 million, he said.

In 2010, Japan imported 40,000 metric tonnes (44,092 tons) of nickel from Indonesia out of a total of 77,000 metric tonnes (84,878 tons), according to customs-cleared statistics.

    Indonesia, home to the world’s largest copper and gold mine, accounted for 20 percent of Japan’s total copper imports of 1.3 million metric tonnes (1.43 million tons) in 2010.

    Sumitomo Mining, Japan’s No. 2 copper smelter, is boosting investment in upstream assets of copper, nickel and gold to raise its self-sufficiency in these raw materials, with a view that an increase in demand from emerging markets will outstrip supply, particularly in copper.

    “A slowdown of the Chinese economy is a concern, but its huge supply shortage of copper, estimated at 2.6 million tonnes a year, won’t vanish soon,” he said.

    Sumitomo now sells about half of its about 400,000 metric tonnes (440,925 tons) copper cathode output in overseas markets, he said.

    ($1 = 82.35 Japanese yen)

    Editing by Himani Sarkar

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