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Chinese state-controlled steel giant to take over nickel hub in Morowali: reports

State-owned steelmaker China Baowu Steel Group Ltd. is reportedly in talks to acquire some of Tsingshan Holding Group's assets in Morowali, in a mission to expand its business in nickel, which is the main material used in stainless-steel production.

Wike Herlinda (The Jakarta Post)
Jakarta
Fri, August 19, 2022

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Chinese state-controlled steel giant to take over nickel hub in Morowali: reports The Indonesia Morowali Industrial Park (IMIP) in Central Sulawesi is shown in this undated photo. (Courtesy of IMIP)

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singshan Holding Group, Chinese nickel and stainless-steel top producer, is reportedly mulling over the possibility of selling some of its assets in Morowali, Indonesia to China Baowu Steel Group Ltd, a state-owned iron-and-steel firm headquartered in Shanghai.

Tsingshan allegedly decided to finally let go of some of its Indonesian assets as its founder, Xiang Guangda, is looking for a short-term maneuver following mark-to-market losses worth billions of dollars.

Earlier this year, the company’s short positions in nickel were exposed by the metal-price hike on London Metal Exchange, partially due to fear of supply disruption from Russia amid sanctions over Ukraine.

Tsingshan has been moving its nickel business in the Central Sulawesi region since 2009. Throughout the years, the Wenzhou-based company has turned the archipelagic country into a stainless-steel and nickel-production hub in Southeast Asia as well as one of the strongest contenders for electric vehicle (EV) battery-chemicals top producer.

On Aug. 16, an unnamed representative for Tsingshan confirmed the possibility of the sale, despite refusing to unveil more details on the matter. “[It’s] still under discussion,” said the source, as reported by Reuters.

On the other hand, two insiders at Baowu revealed that the potential acquisition would be part of the state-controlled steel-producer’s “long-term goal to expand in the stainless-steel sector, especially in Southeast Asia”.

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One of the sources said Baowu was also seeking to expand its business in nickel, which is the main material used in stainless-steel manufacturing.

“Our layout in the nickel industry is quite limited and it is now too late to buy resources and invest a large amount of money to build factories. […] Tshingshan has the intention to sell some of their assets and build good relationships with SOEs. Both sides are interested in getting a deal.”

According to another report on Bloomberg, the potential transaction between Tsingshan and Baowu is estimatedly worth up to US$4 billion, including acquisitions of stainless steel and nickel-pig iron plants in Morowali Industrial Park.

Read also: Concerns raised over $5b Tesla deal with Chinese firm in Sulawesi 

For Indonesia, the downstream nickel industry -- including the one in Morowali -- had been one of the main pillars of the country’s exports revenue, as President Joko “Jokowi” Widodo claimed in his state speech for the Assembly, ahead of Independence Day. 

The head of state said that the downstreaming of the nickel sector had successfully levered up iron and steel’s year-on-year (yoy) exports up to 18 times by the first half of this year.  

In 2014, Indonesia’s iron-and-steel exports amounted to Rp 16 trillion (US$1.08 million), before skyrocketing to Rp 306 trillion by 2021. Jokowi hoped it would surpass the level of Rp 440 trillion by the end of this year.

He also underlined that Indonesia had become a key producer in the global lithium-battery supply chain, adding some top EV producers from the European Union, the US and Asia also aim to invest in the country.

“Following [the success of] nickel [downstreaming], the government will also push for bauxite, copper and tin downstreaming projects. We have to build a more integrated industrial ecosystem domestically,” he noted. 

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