The Indonesian government has decided to limit investment in low-quality nickel products by cutting tax incentives. The aim is to extract as much value as possible from its abundant nickel reserves and further develop its downstream business.
India's Investment Minister Bahlil Lahadalia said there would be no further tax holiday for any nickel pig iron (NPI) projects. "The nickel content in downstream Indonesia has to be at least 60-70 percent and not just intermediate products," he told Reuters in an interview on Wednesday (2023.5.3). He believes the nickel pig iron (NPI) project can break even in four to five years. So it would be unfair to continue giving it a ten-year tax holiday.
Indonesia has seen a surge in smelting projects since nickel ore exports were banned in 2020. However, it mainly produces nickel iron or nickel pig iron (NPI), which is commonly used in stainless steel production and usually contains 30-40% nickel.
The Indonesian government decided to cancel the tax holiday in order to control the production of new products. In March, the Ministry of Marine Affairs and Investment Coordination revealed plans to suspend the construction of smelters using rotary kiln electric furnace (RKEF) technology. Meti argues that India already has too many RKEF smelters, leading to a glut of new product prices and nickel iron, depressing their prices.
In addition, NPI and iron-nickel production significantly increased the consumption of high-grade sapropelic ore (ni: 1.5-3%). Indonesia's total reserves of high-grade saproitic ore with nickel content of more than 1.7 per cent and 1.5 per cent are 1.76bn tonnes and 2.75bn tonnes respectively, according to the Ministry of Energy and Mineral Resources.
Indonesia, on the other hand, has only 5.2 billion tonnes of nickel reserves. Currently, sapropelite mine recovery from NPI and iron-nickel production is around 100-160 million tonnes per year, a figure that will jump to 450 million tonnes per year if the RKEF smelter project is not stopped.
According to the ESDM Department, saproite mines with nickel content of more than 1.7 percent will be depleted by 2031 and those with nickel content of more than 1.5 percent will be depleted by 2036. Currently, most of the high grade saprolite ore goes to the RKEF smelter, while the limonite ore with a nickel content of less than 1.5% or the low grade nickel ore in Indonesia is used by the high pressure acid leaching (HPAL) smelter that produces grade 1 processed nickel products, which is still relatively small. Ore reserves of less than 1.5% nickel have been recorded as 1.81 billion tonnes of wet ore.
If all HPAL smelters were operational, the annual level of wet ore consumption would reach 58 million tonnes. As a result, ore reserves with a nickel content of less than 1.5% can still last until 2055. In addition to suspending construction of the RKEF smelter, the government plans to adjust the correction factor (CF) of the benchmark price (HPM) for high-grade nickel ore, a policy expected to spur new investment in hydrometallurgical plants that process limonite ore into batteries.
