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JAKARTA (TheInsiderStories) – Chinese stainless steel-maker Tsingshan Holding Group and chemicals firm Huafon Group Co., Ltd. plan to set up a US$3 billion metallurgy and chemical production base in Indonesia, Reuters reported on Wednesday (08/28).

It said, the two companies, both based in eastern China’s Zhejiang province, has signed a deal to jointly build the base, which will include a 12 million tonnes per year capacity coke plant, on the island of Sulawesi.

Previously, Tsingshan has led a group of investors to build a nickel sulfate plant to produce electric vehicle batteries in a $10 billion industrial park linked to its Weda Bay Industrial Park, in Maluku. The group includes China’s Huayou Cobalt Co., Ltd., and Zhenshi Holding Group.

The first phase of the project will produce coke and other steelmaking raw materials, as well as synthetic ammonia, the statement said, while the second phase will use crude benzene to develop polymer materials.

No timeframe was provided for the launch of the project, although the statement said the two sides had assembled working groups to carry out implementation work so it can be launched “as soon as possible”

Tsingshan is the biggest nickel producer in Indonesia and is pursuing two separate projects to produce battery chemicals on Sulawesi.

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, the company said days ago.

Automakers 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.

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.

Chinese battery firm GEM said in September it was teaming up with others including Indonesia’s stainless steel producer Tsingshan on the plan, initially estimating the project would cost $700 million.

But the company then 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 estimates.

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.

It said the latest cost estimate for the plant was around $1 billion, adding that project details and costing were still being worked out.

The consortium includes Guangdong Brunp Recycling Technology, a unit of Chinese battery maker Contemporary Amperex Technology Ltd (CATL), and Japanese trading house Hanwa.

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.

It said the Morowali plant would cost less than previous HPAL plants because the infrastructure such as port facilities, roads, and power plants was already built.

A nickel industry source said the $1 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 the capacity to produce 60,000 tonnes of nickel.

Written by Lexy Nantu, Email: