Nickel smelter developers shelve Indonesia projects amid credit squeeze (updated)

Elemental Asia SA

18/11/2015 14:47

* Developers say projects delayed until prices improve 
    * Several projects need refinancing - ministry official 
    * Still expects seven smelters to be built in 2016 
 
 (Recasts, updates throughout) 
    By Fergus Jensen 
    JAKARTA, Nov 18 (Reuters) - Nickel smelter developers are 
putting projects on hold as they  struggle to get financing with 
metal prices near their lowest in more than a decade, industry 
and government stakeholders said on Wednesday. 
    Indonesia was the world's top exporter of nickel ore until 
2014 when it banned shipments in an effort to push miners to 
develop downstream, or mineral processing, industries.  
    With abundant reserves of relatively high quality ore  
investors say there is potential for developing nickel smelters 
in Indonesia, but the current market is challenging. urn:newsml:reuters.com:*:nL8N12D0TC 
    "Banks, primarily government banks, are allergic to 
providing support, credit (and) working capital etc to miners," 
Joseph Renyut, an advisor to smelter operator Cahaya Modern 
Metal Industri, told Reuters on the sidelines of a nickel 
industry conference in Jakarta. 
    Indonesia's mining ministry has received applications for 
smelter permits from at least 30 companies but several of the 
projects have been postponed or delayed, a mining ministry 
official who asked to remain anonymous, told Reuters. 
    "Several need refinancing because investors have stopped. 
Most are from China and China is in crisis," he said on 
Wednesday. "If they are built they won't be economical so they 
are waiting." 
    But he said the government still expects at least seven 
smelters to be built next year. Another official said the 
government expects to add at least 767,000 tonnes of ferronickel 
production capacity in 2016. Nickel is extensively used to make 
stainless steel and other corrosion-resistant alloys. 
    Wahyu Prasetyo, deputy project manager at Karyatama Konawe 
Utama, a subsidiary of China Hanking Group, said his company 
wanted to expand from a pilot project to a 40,000 tonne high 
grade ferronickel smelter in North Konawe, Sulawesi. 
    "The big one is still under study because we're trying to 
get the process cost lower than LME prices," he said, referring 
to London benchmark nickel prices. "We're struggling to get 
financing." 
    Titon Mineral Utama CEO Warsito Hans Tanudjaja said his 
company had also invested in a small-scale nickel pig iron 
smelter but was facing similar difficulties expanding and was 
also waiting for nickel prices to improve. 
    "When the market comes back we'll be more ready than the 
others," he said adding that his company needed LME nickel 
prices to climb above $10,500 per tonne. 
    LME nickel  CMNI3  was not far from its weakest in more than 
a decade below $8,850 a tonne on Wednesday, following a more 
than 2 percent slide on Tuesday.  urn:newsml:reuters.com:*:nL3N13D16T 
    Complicated permitting and licensing issues coupled with 
uncertainties over rules and poor communication between central 
and regional levels of government are also holding back 
projects. 
    "Lots of gymnastics needs to be involved for this to 
happen," Prime Minerals  PMTP.WA  Chief Operating Officer Pawel 
Lis told Reuters. 
    A 3.5 trillion rupiah ($253.64 million) smelter project in 
Halmahera is also waiting for government financing, an official 
at Indonesia's state-owned miner PT Aneka Tambang Tbk 
(Antam) ANTM.JK  told Reuters. 
    "If we get lucky maybe we'll get the last (cash injection) 
for this budget year," said Taofik Hidayat, Antam's vice 
president of risk management. 
     ($1 = 13,799 rupiah) 
 
 (Additional reporting by Wilda Asmarini; Editing by Himani 
Sarkar and Susan Thomas) 
 ((kanupriya.kapoor@thomsonreuters.com; +62 21 29927605; Reuters 
Messaging: kanupriya.kapoor.thomsonreuters.com@reuters.net)) 
 
Keywords: INDONESIA NICKEL/