Indonesian manufacture Purchasing Managers Index stood at 51.2 in March, higher than February 50.1 - Photo by Industry Ministry Office

JAKARTA  (TheInsiderStories) – Investment in Indonesia’s smelting industry is likely to improve this year over last year, as reflected in a significant amount of investment in the industry in the first month of 2018, in line with the government’s drive to boost the development of its downstream mineral sector.

As revealed by the Industry Ministry, as much as US$3 billion has been invested in smelting projects, principally from three companies: PT Fajar Bhakti Nusantara, Virtue Dragon from China and PT Kalimantan Surya Kencana.

PT Faja Bhakti Nusantara set aside US$350 million to develop nickel pig iron in Gebe, West Papua. Virtue Dragon invested US$2.5 billion to develop a ferronickel plant in Konawe, South East Sulawesi and PT Kalimantan Surya Kencana invested US$135 million.

Kalimantan Surya Kencana is currently conducting a feasibility study, to be followed by construction. The Industry Ministry expects the Company’s plant to be completed by end-2018.

Director General for Industry, Metal, Machine and Transportation and Electronic Equipment Harjanto said the new investments will help boost national production capacity and at the same time lift downstream mineral exports. The pickup prices of mineral products in the global market, he said, are expected to encourage smelter investors to speed up the realization of their investments, to take advantage of the uptrend in prices.

The prices of commodities such as gold, copper, silver, zinc and others have showed an upward trend in recent months. Many observers have also projected these commodities would continue to go up this year.

The Head of Indonesian Association of Processing and Smelting Producers Prihadi Santoso has expressed his optimism about the country’s smelting industry growth this year, partly driven by improvement in the domestic economy and pick-up of demand from global consumers

The Industry Minister Airlangga Hartarto stated his Ministry will continue its focus to develop downstream industries, including in the mining sector. In the steel industry, the government, he said, aims to boost production to 10 million tons by 2025, and stainless-steel totaling 4 million tons per annum by 2019.

After getting off to a slow start, the development of smelting plants in the country appears to have gathered pace since last year. Indonesia has set an ambitious target to make the country one of the top ten basic-metal producers in the world. This is in fact achievable, since Indonesia is one of the ten countries with has abundant reserves of bauxite, nickel and other ores.

Currently, a number of companies are developing smelters, including Morowali Industrial Zone in Central Sulawesi, Bantaeng Industrial zone in South Sulawesi and in Konawe Industrial Zone in Southeast Sulawesi.

Data from the Industry Ministry shows that as of end-2017, there were 34 smelters already in operation, with combined investment of Rp752.62 trillion, comprised of smelters to process iron ore, nickel, bauxite, metal concentrates, stainless steel and aluminum. These smelters employ 30,000 workers.

In addition, the government needs to apply transparent, consistent and simple investment procedures in order to encourage more investors to develop smelters locally.

 Nickel Smelters

In term of nickel smelter development, Director General for Mineral Resources and Coal Bambang Gatot Aryanto revealed that as of end-October last year, total investment in nickel smelters alone reached US$5.05 billion, or Rp68 trillion.

The investments were directed to develop 13 nickel smelters with a total annual volume of 34 million tons. Based on Energy Ministry data, the 13 smelters have begun operating and are already producing 598,000 tons of FeNi and NPI, as well as 64,000 tons of Nickel-in-matte (Ni-Matte).

Bambang Gatot said the uptrend of the development of nickel smelters was partly driven by incentives provided by the government. He said the issuance of Government Regulation No. 1, 2017 as well as the Energy Ministry’s Regulation Number 6, 2017 have stimulated investment in the nickel sector. Based on these regulations, the government granted incentives to mining companies to develop nickel smelters.

According to Bambang Gatot, Indonesia currently has 29 nickel smelters, consisting of smelters that are already producing and those under construction. Producing smelters are owned by PT Aneka Tambang, PT Fajar Bumi, PT Cahaya Modern Metal Industry, PT Macika Mineral Industry and PT Integra Mining.

The companies that have invested in building smelters include Vale, Aneka Tambang, FBLN, Sulawesi Mining Investment, Gebe Industry Nickel, Megah Surya Pertiwi, COR Industri Indonesia and Heng Tai Yuan. The combined investment of these companies reached US$5 billion.

The Energy and Mineral Resources Ministry has also granted an export quota to six companies with a bauxite export quota of 14.9 million tons. However, in the eleven months to November, total bauxite exports reached just 696,000 tons.

One recent investment in the smelter industry is that of South Korean Made By Good (MBG) Group, through its Indonesian subsidiary PT MBG Nikel Indonesia. The company plans to develop a nickel smelter in Konawe Utara Regency, Southeast Sulawesi Province, with an estimated investment of Rp76 trillion rupiah (US$5.32 billion).

The project, built on 311 hectares of land, is one of the most prominent nickel smelters being developed on the island, and also represents a major investment by the South Korean company in the country’s mining sector. Impressed with this, the Industry Ministry and local governments in the Province have given full support to expedite the project as planned. (*)