Indonesia Evaluates Cutting Nickel Production

The Indonesian government is undertaking a comprehensive evaluation of the potential termination of permits for Rotary Kiln-Electric Furnace (RKEF) smelters, which produce ferronickel and nickel pig iron. This move comes in response to the rapid depletion of the country’s high-grade nickel ore reserves, as announced by a senior mining ministry official on Tuesday.

Irwandy Arif, a senior official with the Energy and Mineral Resources Ministry, stated that Indonesia, the world’s largest nickel producer, is experiencing significant ore depletion following a surge in downstream investments. The government is now looking to reserve remaining stocks for higher value-added products, such as nickel chemicals used in manufacturing batteries for electric vehicles (EVs).

“We are focusing on the development of High Pressure Acid Leach (HPAL) smelters and those producing nickel matte,” Irwandy said at an industry conference organized by the Shanghai Metal Market. HPAL technology extracts nickel and cobalt from laterite ore bodies to produce Mixed Hydroxide Precipitate (MHP), a crucial precursor for the battery industry.

It remains unclear whether the potential termination of permits will affect existing RKEF smelters. Irwandy highlighted that reserves of ore graded above 1.5% are projected to last only until 2029 without further exploration efforts.

Indonesia, once a major exporter of nickel ore, banned shipments of unprocessed nickel in 2020 to stimulate onshore investment. This policy shift has led to substantial growth in the country’s downstream nickel industry but has also accelerated the depletion of high-grade ore reserves.

The Indonesia Nickel Miners Association (APNI) has urged the government to impose a moratorium on new pyrometallurgy plants to prolong the lifespan of high-grade reserves. APNI’s Secretary-General Meidy Katrin Lengkey said, “We need to prioritize sustainable practices and ensure that our nickel reserves can support the burgeoning EV battery industry.”

High-grade nickel ore, particularly the 1.7% grade used primarily for producing nickel pig iron, is critical for stainless steel manufacturing. In contrast, the lower grade nickel is more suitable for EV battery production.

The Indonesian government’s strategic shift towards developing HPAL and nickel matte smelters aligns with global trends favoring electric vehicle adoption. By prioritizing the production of battery-grade nickel, Indonesia aims to position itself as a key player in the global EV supply chain.

Industry experts have noted the importance of this transition. According to a report by Reuters, “Indonesia’s move to reserve nickel for battery production is crucial for the future of the electric vehicle market, given the country’s significant role in the global nickel supply.”

However, the transition to HPAL technology is not without challenges. HPAL plants are capital-intensive and require advanced technology, making them more complex to develop compared to traditional RKEF smelters.

Nickel prices have recently seen fluctuations, with the metal falling to $17,905 per tonne, a level last observed in mid-April. This decline is attributed to profit-taking by investors and macroeconomic factors. The European Central Bank’s anticipated key rate cut, along with indications from U.S. data suggesting a possible Federal Reserve rate cut this year, has led some investors to adjust or reduce their commodity positions.

Furthermore, concerns over supply disruptions due to riots in New Caledonia, a French overseas territory that holds about 20-30% of the world’s nickel reserves, have started to ease. Tensions are cooling off, and France has lifted the state of emergency, providing some relief to the market.

Information for this briefing was found via Yahoo News and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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