Indonesia’s ban on nickel ore exports is stimulating investment in processing plants, but this will be a slow process over the next decade, a senior analyst told a conference on Wednesday.
The lack of quick growth in Indonesia as Chinese output falls will help create a long-awaited global market deficit, said Jim Lennon, senior consultant at Macquarie.
Indonesia’s output of nickel pig iron (NPI) is forecast to reach 200,000 tonnes a year, but this will only be achieved in 2020, with production this year at only a tenth of that, Lennon told Metal Bulletin’s Nickel Conference in London.
NPI is used in the production of stainless steel and as a cheaper alternative for refined nickel and ferro-nickel.
Indonesia, which had been China’s top supplier of nickel ore, last year banned exports of unprocessed ore, aiming to spur the growth of added-value industries in the country.
A slew of Indonesian smelter projects were announced in the wake of the ban, but implementation of them has been slow.
“The future is Indonesia … but I think that industry will develop over the next decade rather than over the next couple of years,” said Lennon, regarded as one of the top experts in the nickel sector.
Lack of infrastructure, problems with permitting as well as a slump in nickel prices has inhibited progress of the Indonesian projects, he said.
Benchmark nickel on the London Metal Exchange slid to a low of $12,205 a tonne earlier this month, the weakest in nearly six years, as LME inventories kept hitting record highs and as ore from Philippines filled the gap left by the Indonesian ban.
“A lot of the existing capacity that’s being built needs prices well above $20,000 to justify the investment,” he said.
“Until we see prices move significantly above current levels for some time, I don’t think you’ll see huge investment in Indonesia.”
China, which accounts for about half of global nickel demand, is expected to see its NPI output fall 22 percent this year to 375,000 tonnes due to shortages of ore, he said.
This lack of supply will help push the global nickel market into a deficit of 43,000 tonnes this year from a surplus of 109,000 tonnes last year, Lennon added.
One smelter project in Indonesia has been launched by PT Silawesi Mining Investment, a joint venture of China’s stainless steel producer Dingxin Group and Indonesian miner Bintangdelapan Group.
Early this year, the venture launched a nickel pig iron processing plant and shipped its metal this month, Lennon said.
Zhejiang Yaang Pipe Industry Co., Limited (www.yaang.com)