Aerial view of nickel smelters operated by Virtue Dragon Nickel Industry in Morosi, Indonesia. (Photo by Andry Denisah/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Indonesia’s nickel boom is fading but the Chinese technology which made it possible could soon start a similar surge of overproduction of the battery metal in Africa.
A flood of Indonesian nickel has been the prime cause of a collapse in the price of the metal which is also used to make stainless steel.
Going down. The price of nickel has almost halved over the last four years
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Over the last four years the price of nickel has crashed from $30,000 a ton to less than $18,000/t but did drop to a low as $14,200 late last year.
It was the fall in mid-December which served as a wake-up call for the government of Indonesia that the nickel industry which it had actively encouraged was doing more harm than good.
As well as surface mining clearing extensive tracts of forest the electricity demands of the mainly Chinese owned and operated nickel smelters required the burning of large amounts of coal.
Tighter government regulations, including reduced mining and export quotas along with higher taxes, has led to some mine closures and reduced operations of the preferred nickel processing technology using rotary kiln electric furnaces (RKEF).
Chines Miners Annoyed
The new rules are also straining the once close relationship between the government and Chinese mining and metal processing companies which are reported to be planning investment in other countries, including Tanzania, Madagascar and New Caledonia.
The new Indonesian mining and processing regulations are a factor in a forecast from a nickel industry lobby group that this year could see a global nickel deficit for the first time since 2021.
The International Nickel Study Group is expecting a surplus of around 280,000 tons of nickel last year to flip into a deficit of 32,000 tons this year.
A nickel mine on Obi Island, North Maluku, Indonesia. Photographer: Dimas Ardian/Bloomberg
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Warnings that Indonesia’s encouragement of nickel production would cause long-term environmental problems were largely ignored by the country’s government until now and follow an increase in international denunciation.
The most recent criticism came from a research organization, the Australian Institute of International Affairs (AIIA) which last month published a paper title “Indonesia’s nickel boom was built on an illusion”.
The AIIA report started by saying that a political bargain behind Indonesia’s nickel boom is beginning to unravel.
“What Indonesia created was not a mature industrial ecosystem but a heavily subsidized extraction-and-processing machine dependent on cheap coal power, permissive regulation and relentless expansion regardless of long-term market realities,” the AIIA said.
In effect, Indonesia had allowed itself to be used by Chinese miners and metal processors to produce cheap metal for export to China’s vast manufacturing sector without careful consideration of the environmental and economic costs.
Exit Strategy
The Chinese miners are complaining about the tougher regulations, but they are also working on an exit strategy.
According to a Reuters news report last week China’s Tsingshan group is considering a nickel development in Madagascar while another Chinese miner, Lygend Resources is looking at opportunities in Tanzania and on the Pacific island of New Caledonia.