Why Indonesian Antam wants to take over a Chinese nickel smelter

Indonesia has the largest reserves of nickel ore in the world, mainly located on or near the island of Sulawesi. The raw ore has long been mined in Indonesia and exported to other countries for refinement and use in stainless steel production. But in recent years, nickel has gained new currency as a commodity and bargaining chip for Indonesia industrialization efforts.

Batteries are needed for the transition from fossil fuels to clean energy. Lots of them. Lithium-ion batteries, one of the most commonly used types, are manufactured using nickel as a key input. This means that demand for nickel is expected to rise as the clean energy transition accelerates around the world.

As part of efforts to boost industrialization downstream, Indonesia banned the export of unprocessed nickel ore several years ago. The aim was to force companies to refine the ore in Indonesia and stimulate investment in domestic smelters. If we just look at that ambition, it has been quite successful.

Since the export ban came into effect, billions of dollars have flowed into Indonesian nickel smelters and associated industrial parks. We know it works because refined nickel exports have exploded in recent years, to the point that there is now a global supply glut, putting some foreign nickel miners in trouble. out of order.

Why did all this happen? Exporting the raw ore meant that most of the added value during the processing phase did not end up in Indonesia. By processing nickel domestically, more of the value created remains in Indonesia. And to ensure that Indonesian companies, and not just foreign companies operating in Indonesia, are involved in this value creation, the state has sought to expand its footprint in the sector.

Antam is an Indonesian mining company with interests in gold and nickel. It is 65 percent owned by the state through a holding company called MIND ID. This holding company was established to manage state mining assets in a coordinated manner so that the state’s national and strategic interests could be better served. Unsurprisingly, the nickel ore ban has been good for Antam’s business.

In 2018, before the ban came into effect, Antam’s income amounted to approximately US$1.6 billion (at a constant exchange rate of 16,000 rupiah per dollar), of which 43 percent were export earnings. By 2023, sales had grown to $2.6 billion, of which only 14 percent came from exports. Nickel ore has become an increasingly important part of Antam’s operations, with the miner producing 13.5 million wet metric tonnes last year, up from 1.7 million in 2019.

Antam produces much more nickel ore than a few years ago, and almost all of it is absorbed domestically. This indicates that the export ban is achieving one of its main objectives. But the long-term goal was never limited to nickel ore; it involved entering more valuable links in the nickel supply chain, including smelting and related industrial activities. We see this process now beginning to take place.

Although the export ban has accelerated investment in nickel smelters, many of them are majority owned by foreign companies, mainly from China. It appears that Antam is now eyeing a bigger role for itself in this part of the value chain, which provides useful context for CEO Nicolas Kanter’s statements. announcement last month that the state miner would take over a smelter from China’s Tsingshan Holding Group. Tsingshan has been a major investor in Indonesia’s downstream nickel sector. In one separate agreementAntam is working with Chinese company Ningbo Contemporary Brunp Lygend to develop two additional nickel processing facilities.

Antam currently produces ferronickel, a type of alloy used to make stainless steel, but is held back by capacity constraints. The ferronickel smelters have been operating at or near 100 percent capacity in recent years, meaning existing facilities cannot produce enough refined nickel to meet current demand.

These recent announcements indicate that Antam is looking to continue to grow and expand its positions in the nickel value chain by adding more processing capacity through joint development and acquisition. The likely end goal is not only to produce more ferronickel, but also to begin producing more highly refined battery-grade nickel.

Indonesia’s export ban triggered a major investment wave in the domestic nickel value chain, with billions of dollars flowing into smelters and industrial parks. Now Antam is trying to position itself in increasingly strategic and valuable links in that chain to exert greater control over the production of refined nickel products such as ferronickel and nickel matte. It is too early to say whether Indonesia’s nickel play will achieve all its objectives, but Antam’s acquisition and development of more smelter capacity is an important part of that long-term vision.