CORRECTED-Asia stainless steel mills to benefit from Chinese nickel-pig-iron from Indonesia – by Polly Yam (Reuters U.S. – September 11, 2013)

HONG KONG, Sept 11 (Reuters) – Chinese firms operating nickel mines in Indonesia are likely to step up plans to build nickel-pig-iron plants in the Southeast Asian country in order to continue shipping ores back home, which would help support higher production in China next year.

The move could mean Chinese firms’ supply of nickel-pig-iron, a low-grade ferro-nickel used in stainless steel production, would rise in Asia in 2 to 3 years time, helping regional mills such as POSCO and Nippon Steel & Sumitomo Metal to cut costs, industry sources said.

China is the dominant producer of nickel-pig-iron in the world and the output accounts for about a quarter of the global nickel production. But the production relies on imports of raw material nickel laterite ores, with Indonesia and the Philippines providing most ores.

Indonesia had planned to ban the export of ores from 2014 to push miners to build smelters at home to benefit the local economy. But in a policy reversal, it may now relax the ban in order to help support the rupiah currency and miners with smelters under construction will be allowed to continue to export ores.

The policy twist is prompting Chinese firms to step up smelter projects in Indonesia.

“To make it quick, we are thinking about relocating a small blast furnace to Indonesia,” said a source at a nickel-pig-iron producer in China, which owns a few nickel mines in Indonesia.

Other Chinese firms operating nickel mines in Indonesia were also considering relocating idle furnaces or build new small blast furnaces as the costs were low, the source added.

Twelve to thirteen Chinese firms operate nickel mines in Indonesia currently and half plan to build plants to produce nickel-pig-iron or standard ferro-nickel, said Xu Aidong, chief nickel analyst at state-backed research firm Beijing Antaike Information Development Co Ltd.

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