209 (27.06.19)


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20 CRITICAL TRADE ROUTES

13. Sulawesi, Indonesia

How Indonesia is overturning the global nickel market

In the mangroves of Sulawesi, an island off the coast of Indonesia, a clearing the size of a meteorite crater has been cut into the jungle. On the upturned soil, under red cranes and blue tarpaulin, billions of dollars of capital are going into one of the world’s largest mining complexes: barges bring coal into a new power station, whilst smelters roll-out millions of tonnes of nickel and stainless steel. All built in three years, total investment is running at $5bn to $6bn, according to the Ministry of Industry. Those numbers can’t be seen in the filings of any companies listed in London, New York or Toronto. Backed by an Indonesian General with ties to the US and a group of Chinese companies, the site was covered in trees in 2014. The government sprung a ban on exports and companies from Japan and Australia either closed or left. China jumped onboard: supported by acid plants and a concrete hotel building, Chinese steel giant Tsingshan and a consortium of battery makers have built 20 nickel smelting facilities on Sulawesi, feeding tonnage into steel slab factories. With 30 jetties and shipping capacity equal to the main port in Jakarta, Indonesia's nickel volumes are doubling every 18 months, whilst stainless steel shipments to China, a mainstay of its manufacturing, have tripled in a year. So far, the nickel market has been protected: Tsingshan’s output is low-purity and cannot be used in car batteries, the biggest source of new demand for nickel companies. But Tsingshan is again threatening to up-end the market, saying it will spend $700m building new battery facilities, producing battery-grade material before the end of the year. Nickel bosses and analysts have dismissed the plans as “totally impossible”, “not realistic” and “an issue of communication... there isn’t anything real behind it.” But on Sulawesi, cranes are moving, and in London, prices are falling, down by one third since the scheme was announced. Indonesia will be “the main player” in electric car batteries, according to the General behind Sulawesi's investment boom, Luhut Binsar Pandjaitan. “We will control the world market.”

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8 days

Nickel and stainless steel from General Pandjaitan’s metal complex on Sulawesi is less than 8 days from buyers in mainland China

5m tonnes

Up from zero three years ago, Sulawesi is building capacity of 5m tonnes of stainless steel per annum, equal to 10 per cent of the global market

$7.5bn

Based on current export prices of $1,500 per tonne, Sulawesi’s output will soon be worth $7.5bn; stainless steel prices in China are down by one-fifth since exports began