Indonesia has stopped approving applications for nickel plants that make certain intermediate products, a renewed push by the world’s biggest producer of the metal to move further up the value chain.
Industrial permits, known as IUIs, will not be given to new projects that propose making some intermediate products — including nickel pig iron, matte and mixed hydroxide precipitate — without plans to process them further, according to a government directive.
Indonesia, which produces around 60% of the world’s nickel, banned exports of raw nickel ore in 2020 in an attempt to spur investment in processing. The latest move is another shock to the fast-growing industry and will force new entrants to invest in extra capacity downstream — which in turn could lead to project delays and cancellations.
“The regulation underscores the government’s intent to address Indonesia’s persistent oversupply,” Citigroup Inc. analysts including Ryan Davis wrote in a note on Thursday. “Implementation details remain fluid, notably on how strictly the regulation will be applied.”
Many firms have already secured industrial permits for plants already under construction, but the new regulation might affect those set to finish after 2027, according to the Citigroup analysts.
Several high-pressure acid leach facilities — which produce mixed hydroxide precipitate — are set for completion over the next three years. While MHP can be further refined into precursor chemicals used by the electric vehicle battery sector, few plants capable of doing so exist in Indonesia.
The directive was originally published in a government regulation in June but has only recently generated discussion in the market.
(By Eddie Spence)
