2016 REVIEW: China-backed Indonesian nickel projects step up production to satisfy growing Chinese NPI demand

After Indonesia implemented a ban on nickel ore exports in January 2014, Chinese enterprises have stepped up their efforts to establish nickel smelters in Indonesia to meet growing nickel pig iron (NPI) demand from China’s stainless steel sector.

December 30, 2016

By Ellie Wang

Prior to the ban in 2014, Indonesia was the top supplier of laterite ore to China, supplying more than 50% of Chinese imports.

Since then, almost all of the NPI produced by China-backed projects in Indonesia has been delivered to China in order satisfy the country’s rising demand, while Chinese domestic NPI production has largely remained flat this year.

Chinese stainless steel production reached 24.79 million tonnes in 2016, an increase of 11.87% year-on-year, according to Chinese information provider Chinese United Steel’s data.

Meanwhile, NPI production from China-back projects in Indonesia has increased by 213% year-on-year in 2016, with Tsingshan Group’s rotary kiln electric furnace (RKEF) project contributing the most to this growth.

Chinese-funded Indonesian NPI projects are expected to produce 95,900 tonnes of nickel metal in 2016, up from 30,600 tonnes in 2015, marking a 213% year-on-year increase, according to statistics from Chinese Merchant Futures (CMF).

Global primary nickel output is estimated to reach 1.96 million tonnes in 2016, an increase of 0.35% on an annual comparison, according to CMF’s statistics.

Three China-backed Indonesian projects using RKEF technology to produce NPI have drawn much attention from market watchers this year due to having much greater production capacities and significantly cheaper operational costs compared with blast furnace projects, Metal Bulletin has learnt.

The projects are Tsingshan Group’s project on Sulawesi Island, Xinxing Ductile Iron Pipes Co’s Obi island project and Delong Nickel Industry’s project also located on Sulawesi.

Of these three projects, Tsingshan’s smelter on the island of Sulawesi is expected to produce the largest amount of nickel metal this year, with an estimated 80,000 tonnes, CMF researcher Sam Xia told Metal Bulletin on Wednesday December 28.

Tsingshan’s 80,000 tonnes of nickel metal output from its Sulawesi smelter accounts for 83% of the total combined nickel in NPI output from the three projects.

Xinxing’s smelter on Obi Island is expected to contribute around 3,200 tonnes of nickel in 2016. The company’s first furnace was put into operation in October of this year, as Metal Bulletin reported earlier.

Xinxing currently has three 33,000 kVA electric furnaces, two of which are fully operational, an official from the company told Metal Bulletin.

Jiangsu Delong’s Indonesian smelter currently has five 33,000 kVA electric furnaces which are likely to be put into operation at the beginning of 2017, a source familiar with the situation told Metal Bulletin.

Jiangsu Delong was unavailable for comment at the time of publishing.

Tsingshan’s Indonesian NPI capacity in 2016

Tsingshan achieved an annual capacity of 900,000 physical tonnes of high-grade NPI (around 10% nickel content) – equivalent to a capacity of 90,000 tpy of nickel metal – in 2016.

Tsingshan, the first company to tap into the Indonesian NPI market, successfully put the second phase of its project into full production in March of this year.

The second phase of the project has a 600,000-tonne capacity of high-nickel content NPI annually, according to Tsingshan.

The project’s first phase which came on stream in the first quarter of 2014 had a 300,000-tonne capacity of high-nickel content NPI, Tsingshan said.

Tsingshan successfully carried out pilot production for the third phase of its Sulawesi project, the company announced on December 11.

While in June of this year, the company also carried out pilot production at its Indonesian stainless steel plant, as Metal Bulletin reported earlier.

Chinese investment into blast furnace projects in 2016

Despite their cost disadvantages and lower capacities, projects using blast-furnace technology have remained popular with Chinese companies this year. Investors of notable projects include Zhenshi Holding, H&Shun International Holding and Macrolink Group.

Zhenshi’s project in the Indonesian province of North Maluku, which has four 80m3 blast furnaces and was put into commission in April this year, has a monthly NPI output of 8,000-10,000 tonnes, according to Chinese information provider Antaike.

H&Shun International has four 45m3 blast furnaces on the island of Sulawesi, which were put into operation in the first quarter of 2016, according to a source from H&Shun.

Macrolink Group owns four 80m3 blast furnaces, two of which were put into operation in late October with an estimated monthly output of 4,800 physical tonnes.