FOCUS - Antam eyes exporting nickel ore as Indonesia revives talk of easing ban

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Vivian Teovivian.teo@fastmarkets.comJoint News Editor - Asia

Singapore 08/09/2016 - Talk that Indonesia might ease its export ban on unprocessed ore have been revived, with state-owned miner PT Aneka Tambang (Antam) eyeing the resumption of nickel ore exports to take back market share from the Philippines.

Indonesia's interim energy and mineral resources minister, Luhut Pandjaitan - who took office in August after replacing the sacked Arcandra Tahar - has proposed that some companies be allowed to export semi-finished products so those firms that had committed to build smelters will have the necessary funds to continue doing so, according to local reports. 

On Tuesday, Antam said it fully supports the ministry's plan to relax the export ban temporarily and detailed its plans for exporting nickel ore should it be allowed to do so.

Antam will allocate high-grade nickel ore for domestic smelting but will make unprocessed nickel ore, which cannot be used domestically, available for export. This unprocessed nickel ore has a better grade than comparable material from the Philippines, making it the more attractive product, it said.

"We have an unprocessed ore as a by-product from mining activities, which [is] uneconomical to process in our plant or in another domestic smelter. But... it can generate additional value for national income and generate funding for smelter development if it can be exported rather than become an unprocessed material without any economic value," Antam president director Tedy Badrujaman said in a statement.

The possible relaxation of Indonesia's ore export ban has been widely discussed in the market over the past year - industry participants had mostly felt that this was unlikely because it would be at odds with the government's aim of encouraging downstream investment when it imposed the export ban in 2014.

But hopes of such a move appear to have been rekindled by the new minister's initiative.

Several companies have halted construction of smelters because they were no longer economically viable while the export ban is in place, Luhut, who is also the country's coordinating maritime affairs minister, was cited as saying in a Jakarta Post report on Monday.

"Let's look at the companies that might have already completed 25 or 35 percent of construction but stopped because of their cashflow. If we look at it fairly, we can relax the ban for a limited amount of time," he said.

There is a high possibility of the rule being relaxed, perhaps as soon as next year, Liao Rongrong, a nickel analyst at Shanghai Metals Market, told FastMarkets.

"The Indonesian economy has not been doing well and this would be a major concern for the government when considering whether to relax the ban," he said.

Despite investment in the construction of a handful of nickel pig iron (NPI) smelters since the ban came into force in 2014, many who had committed to build smelters in the country have not followed through due to the commodity price slump, he added.

Indonesian domestic NPI processing capacity has climbed but China's largest stainless steel producer, Tsingshan Holding, accounts for most of this. Tsingshan has 900,000 tonnes per year (10-percent nickel content) of NPI capacity in Indonesia, with another 600,000-700,000 tonnes per year set to come fully onstream in the second half of 2017.

Any relaxation of the export rule will probably come with conditions - firms are likely to need to have already made certain investments or have carried out construction of smelters to certain stages, while a quota system should also be enforced, sources said.

Still, not all are optimistic that a rule change will come about soon.

"This has been talked about for some already but nothing formal has been passed," a Tsinghan official said.

But should Tsingshan qualify for an export quota for nickel ore, the company would be interested in exporting, he added.

"The raw material is still in demand outside Indonesia," he said.

Indonesia was China's largest source of nickel ore until the export ban was established, since when the Philippines has become the country's largest supplier.

(Editing by Mark Shaw)
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