T

he effects of a government regulation permitting the extension of mineral concentrate exports continue to hit the nickel industry hard, with more than a dozen nickel pig iron smelters halting operations due to low global prices.

Global nickel prices on the London Metals Exchange (LME) initially hit US$9,660 per ton immediately after the regulation was issued in January. Prices declined to a one-year low of $8,680 per ton last week for three-month nickel and were marked at $8,975 on Monday.

This has caused 13 smelters with a combined production capacity of 750,000 tons of nickel pig iron per year to stop operations, according to the Processing and Smelting Companies Association (AP3I).

AP3I deputy chairman Jonatan Handojo declined to disclose the names and locations of the smelters, but said several of the smelters were ones that had started operations but were forced to stop, while others had completed construction but could not begin operations because of low nickel prices.

Meanwhile, another 12 nickel smelters have continued their operations but have suffered severe losses.

The low global prices have forced smelter businesses that also operate stainless steel factories to try and cut costs by combining the two operations.

However, Jonatan said efficiency measures were not enough to ensure that their operations could remain profitable.

“Those who sell nickel ore, such as Antam [state-owned diversified miner PT Aneka Tambang], and those in the iron-nickel alloy business are suffering. The low nickel prices are not benefiting anyone except China,” he told The Jakarta Post on Tuesday, referring to the world’s largest nickel ore consumer.

The regulation enables miners to continue exports of copper concentrate and allows the shipment of low-grade nickel ore and washed bauxite for the next five years.

The policy is seen as contradicting the government’s objective of developing a domestic processing industry, especially because exporting raw minerals is still much cheaper than investing in smelters.

Indonesia has been trying to develop a processing industry in the mining sector for almost a decade with few results.

In 2009, the previous administration initiated a total ban on exports of raw and semi-processed minerals by 2015 to try and push the development of the processing industry.

However, the government postponed the ban in response to complaints from companies and ultimately extended the postponement to Jan. 11 this year.

The government relaxed the restrictions once again in January, much to the chagrin of investors in the smelter industry. These investors have committed up to US$20 billion over the past four years in smelters.

President Joko “Jokowi” Widodo has vowed to make up with the investors and has called on his Cabinet to come up with incentives.

However, AP3I says the government has not offered any solutions even though investors have reported stoppages in operations to the Investment Coordinating Board (BKPM), which issued their licenses.

The Energy and Mineral Resources Ministry’s mineral and coal director general, Bambang Gatot Ariyono, dismissed reports that more than a dozen smelters had stopped operating.

“That information is incorrect. In reality, those smelters are still in the construction and development phase,” he told the Post.

Meanwhile, nickel prices are expected to continue to face pressures because of surging nickel production across the globe.

BMI Research, a unit of Fitch Group, has issued a report stating that nickel production is expected to rise to 235,000 tons this year, a 20 percent year-on-year rise from 196,000 tons last year.