Tsingshan, partners face cost hike at Indonesia battery chemicals plant - sources

Hanwa

05/07/2019 13:15

* Cost of battery chemicals plant may swell, say sources
    * Price tag could reach as much as $1.5 bln - sources
    * Initial estimate may see slight adjustment - GEM official
    * Auto industry watch project in shift to electric cars

    By Pratima Desai and Mai Nguyen
    LONDON/SINGAPORE, July 5 (Reuters) - Tsingshan and other
firms investing in an electric vehicle battery chemical plant in
Indonesia will have to pay significantly more than a $700
million price tag estimated last year, three sources familiar
with the matter said.
    Auto makers are watching the project and others like it in
Indonesia closely as they will eventually provide large amounts
of the chemicals used to make the lithium-ion rechargeable 
batteries for electric vehicles.  urn:newsml:reuters.com:*:nL3N2171WN
    Work on the plant to produce nickel, cobalt and manganese
chemicals used for battery cathodes started in January. The
plant is expected to be completed next year.  urn:newsml:reuters.com:*:nL3N1ZB340
    Chinese battery firm GEM  002340.SZ  said in September it
was teaming up with others including Indonesia's stainless steel
producer Tsingshan Holding Group on the plan, initially
estimating the project would cost $700 million. 
    But sources say the price tag may be $1 billion or more.
    A GEM official said there could be minor adjustments.
    "The project is in progress. The investment may be slightly
adjusted if we need more equipment or something else," Rao
Mingyu, an investment assistant at GEM, said of the $700 million
estimate.
    The plan is to build the 50,000-tonne high-pressure acid
leach (HPAL) facility at Tsingshan's industrial park in
Morowali, on the Indonesian island of Sulawesi.  urn:newsml:reuters.com:*:nL8N1XR4Z7
    A source at one of the partners said the latest cost
estimate for the plant was around $1 billion, adding that
project details and costing were still being worked out.
    Another source familiar with the matter put the cost higher
still, adding: "The estimate they gave last year may have been a
partial estimate. It has been revised up to $1.5 billion."
    A GEM spokesman said the $1.5 billion figure was not
correct. Tsingshan referred questions on the project to GEM.
    The consortium includes Guangdong Brunp Recycling
Technologya, a unit of Chinese battery maker Contemporary
Amperex Technology Ltd (CATL)  300750.SZ , and Japanese trading
house Hanwa  8078.T . 
    CATL did not respond to requests for comment and Hanwa
declined to comment.
    "There were complications with the original number. It may
be to do with the idea the hydroxides produced by Tsingshan
would be shipped back to China to be turned into chemicals," a
source familiar with the matter said of the $700 million figure.
    "It normally takes four years to build one of these plants,
the source said but two years is feasible, particularly as
Tsingshan is involved," the source added.
    Tsingshan's success in ramping up nickel pig-iron (NPI)
production in Indonesia has led the market to think the top
producer could repeat that in chemicals.
    Sources said the Morowali plant would cost less than
previous HPAL plants because the infrastructure such as port
facilities, roads and power plants were already built.
    A nickel industry source said the $1.5 billion price tag
"sounds reasonable as they don't need to buy the mine, set up a
power plant and other infrastructure."
    But analysts say most HPAL projects have taken longer and
cost more than originally anticipated, such as the Ambatovy
project in Madagascar.
    Ambatovy's website says its project cost $8 billion to set
up and will have capacity to produce 60,000 tonnes of nickel.

 (Reporting by Pratima Desai and Mai Nguyen in Singapore;
Additional reporting by Fransiska Nangoy in Jakarta and Yuka
Obayashi in Tokyo and Tom Daly in Beijing;
Editing by Veronica Brown and Edmund Blair)
 ((pratima.desai@thomsonreuters.com; +44 207 542 5113;))