Indonesian Nickel Ore-To-Pig Iron Refining Plans Taking Shape

We reported some months ago on Indonesia’s decision to ban the export of certain minerals and subsequently apply an export tax on raw ores in an attempt to maximise the return from the country’s natural resources.

Indonesia is acutely conscious that by exporting raw mineral ores it is leaving the value-add opportunity to its overseas customers in surrounding Asian markets, but particularly China.

As this graph from Reuters shows, although Indonesia is known as the world’s top exporter of tin, it is also a major supplier of many other minerals.

The country has only had two smelters of any significance, one for aluminum and one for copper, but as Reuters reports, the first of many refining operations has started up, taking nickel laterite ores and producing nickel pig iron.

Indonesia had been China’s largest supplier of nickel ore, feeding the country’s massive nickel pig iron (NPI) industry, but the ban on exports has encouraged Chinese consumers to switch to the Philippines and elsewhere for supply.

The NPI process is almost unique to China, so it’s no surprise that the Indoferro smelter has adopted Chinese technology and workers to create the first of two planned blast furnaces in the Chinese style. The first aims to produce more than 250,000 tons of nickel pig iron in 2013, rising to 500,000 tons by 2014 when a second furnace is due to come on-stream.

Nickel pig iron typically has very low nickel content, with the balance made up of pure iron, making it a viable feedstock for the stainless industry. The NPI produced at the Indoferro plant has a nickel content of around 2.4 percent, meaning output next year will reach 6,000 metric tons of nickel contained in the NPI.

By comparison, the Australian bank Macquarie estimates China produced 275,000 tons of nickel contained in NPI during 2011. Indoferro aims to increase the nickel content to 3.2 percent over time and plans to export throughout Asia and possibly even to Europe — when (or if) the stainless industry there recovers.

Indonesia came in for a lot of criticism for the rather ham-fisted way it introduced the export ban and subsequent relaxation with the addition of export taxes, but time may yet show the decision was a bold and appropriate step to take. Miners had been pressured today's metal prices - MetalMiner IndXto add more value-added steps in-country, but had resisted the pressure while exporting raw ores proved so profitable.

By forcing miners to invest — indeed, by forcing many of the smaller ones out of business — Indonesia may end up with a more consolidated, sophisticated and ultimately more valuable exploitation of the country’s natural reserves.

By Stuart Burns