Indonesian may ban nickel ore exports early, Norilsk Nickel not concerned
SHANGHAI/MOSCOW. Feb 21 (Interfax) - Indonesia may ban the export of copper-nickel ore as early as this May instead of in 2014, but Norilsk Nickel is not taking this as a negative, sector sources have told Interfax.
The Russian mining giant, which is eyeing the acquisition of copper deposits in Indonesia, does not consider news of possible changes to the country's laws as negative, company sources told Interfax. "Restricting the export of ore has been proposed earlier. The change in timeframe in no way tells on our plans," a company representative said. Norilsk Nickel is still studying the Indonesian market and evaluating the prospects for its own prospects there, and a final decision has not been made. The company had not been planning to take ore out of Indonesia; it wanted to process it at a copper smelting plant it was going to build within the country jointly with local company Nusantara Smelting.
Nusantara announced back in August 2008 its plans to build in Bontang a copper-smelting plant with annual production capacity of 200,000 tonnes of copper. Investment in that project is estimated at $850 million. Plans are that raw material will be supplied by local subdivisions of Freeport-McMoRan Copper & Gold, Inc (PT Freeport Indonesia) and Newmont Mining Corp. Nusantara wants to import some of the copper concentrate. Plant construction was slated to start in 2009 and plant launch in H2 this year. This plant would be looking to be the country's second largest after Gresik in Eastern Java.
Indonesia's Minister for Energy and Mineral Resources Jero Wacik last week signed a regulation that aims to boost domestic metal production by banning exports of ores including bauxite, nickel, gold, copper and iron starting 2014.
The ban on nickel ore may be activated earlier and could have major implications for China, which received 25.60 million tons of nickel ore shipments from the Southeast Asian country in 2011, about 53 percent of its total imports of the material. The Philippines supplied roughly 22 million tons of nickel ore to China last year.
"The [Indonesian] ore export regulation is a hot topic among nickel traders and miners at the moment, but our transactions have not been disrupted by the news," a Shanghai-based source with an Indonesian miner told Interfax on the condition of anonymity.
"The ban is likely to be unworkable as Indonesia's poor infrastructure - especially its underdeveloped power grid - will make smelters reluctant to localize operations," said the source.
Though Indonesia possesses ample coal and nickel resources, the distance between the resources is substantial, creating a quandary in terms of power sourcing for smelters. The nickel ore deposits are concentrated in West Sulawesi in the center of the country, while coal resources are concentrated in Sumatra in the west.
"Despite recent investment in power infrastructure, it will be difficult to transfer coal resources to the smelting areas before the ban starts," the source said.
The price of nickel may nonetheless be driven up in the short-term by market expectations of supply shortages as a result of the ban. In the long-term, oversupply problems look set to continue. In September, the International Nickel Study Group predicted a 70,000-ton surplus in the global nickel market this year, up from a 17,000-ton surplus last year. Nickel prices on the London Metals Exchange have risen 15 percent since December on the back of positive economic data from the U.S. and stock replenishing in China prior to the Lunar New Year holiday, though gains were curbed by weak demand, Myyouse nickel analyst Xie Huiyu told Interfax.
"Though nickel rose in December, the price of stainless steel stayed steady indicating that downstream demand remains soft," said Xie, who predicts nickel will fluctuate between $19,000 and $23,000 per ton this year.