Since Indonesia banned ore exports, the global nickel industry has been rocked by surging prices, Chinese workers like Zhang Qi Guang are building smelters in Sulawesi and business at Eva’s Jewel restaurant has collapsed.
Indonesia, the world’s largest producer of mined nickel, halted shipments Jan. 12, sending prices up as much as 56 percent and prompting Morgan Stanley to forecast a global output deficit over the next five years.
The government’s rationale for the ban was that too much wealth was leaving the country because the raw ore is worth far less than refined metal. It figured the world would come to its doorstep to build smelters that extract nickel from the red earth. While some of those investments have begun, the downside is idle mines, tens of thousands of lost jobs and piles of unwanted ore waiting to be processed. Sales at Eva’s Jewel in the town of North Konawe fell as much as 80 percent.
“You never get the sweet thing unless you eat the bitter thing,” said Alexander Barus, vice president of PT Sulawesi Mining Investment, a joint venture of Jakarta-based Bintangdelapan Group and Chinese steelmaker Tsingshan Holding Group, which is building two smelters on Sulawesi. “We feel sad about the people, but just you wait two or three years.”
The ban’s impact on the nickel market was akin to how oil buyers might respond to a halt in supplies from Saudi Arabia, the top exporter, Citigroup Inc. said on May 21. Global mined output will drop 21 percent to 1.8 million tons in 2014, including an 82 percent plunge in Indonesia to 113,000 tons, according to Morgan Stanley. Demand for refined metal will exceed production from next year until 2019, the bank said.
Nickel, used mostly for corrosion resistance in stainless steel, has rallied 39 percent this year to $19,350 a metric ton on the London Metal Exchange, after prices on May 13 touched $21,625, the highest since February 2012.
Sulawesi, the sprawling k-shaped island traversed by the equator, has more than 72 percent of Indonesia’s mineable nickel reserves, according to the Geology Agency. Before the curb, mandated by the Mining Law of 2009, companies stripped the forest to uncover earth that contained about 1.8 percent nickel. The dirt was trucked to the coast, loaded onto flat-bottomed barges and transferred to ocean-going vessels.
China was the biggest ore buyer, so the ban has increased the appeal of investing in Indonesian smelters. Sulawesi Mining’s partners, Jakarta-based mine owner Bintangdelapan and steelmaker Tsingshan, which used to import ore from the island, are already at work on $1.8 billion of projects in Morowali Regency, Central Sulawesi province.
“We’ve already done this in China,” said Zhang, the deputy site manager for the Sulawesi Mining project, who moved to the island from China. The plants, constructed from parts shipped in by Tsingshan before the export ban began, are being assembled by hundreds of local and Chinese workers.
The first smelter and a coal-fired power plant will be completed by December or in the first quarter at a cost of $672 million, Sulawesi Mining President Director Hamid Mina said. Furnaces will transform ore with about 1.8 percent nickel into ingots or granules of nickel pig iron, known as NPI, with 10 percent metal. At full capacity, it’ll produce 300,000 tons a year, or the equivalent of 30,000 tons of pure nickel.
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