Vale Indonesia, Indonesia's largest nickel producer, may need to scrap its plan to build a USD $500 million smelter in Bahodopi (South Sulawesi) as its strategic Chinese partner, for now, backed away from the project due to falling nickel prices. Initially both sides agreed to form a joint venture for the establishment of the smelter.
Part of the reason why global nickel prices have weakened are Energy and Mineral Resources Ministry Regulations No. 5/2016 and No. 06/2017 that both lifted a ban on the export of nickel ore and bauxite (under certain conditions), implying that the global nickel supply (especially with content of less than 1.7 percent) has potentially been raised significantly due to the resumption of Indonesian exports.
Analysts initially put their forecasts for the nickel price in the range of USD $11,000 - 12,000 per ton in 2017. However, after Indonesia's abrupt easing of a three-year ban on nickel ore exports, forecasts have been revised down to the range of USD $9,800 - 10,300 per ton this year.
Nico Kanter, President Director of Vale Indonesia, said the strategic Chinese partner needs some more time to overthink the smelter development plans due to the lower nickel price. The Chinese party will now conduct a new feasibility study.
The Indonesian government has given the green light for 8 million tons of nickel exports for the remainder of this year (which constitutes approximately four percent of the global nickel supply). Although actual exports from Indonesia are still low, the international market has already been pricing in the additional nickel supply from Indonesia and therefore prices are under pressure.
Vale Indonesia's produced 20,107 tons of nickel in Q2-2017, up 17 percent from 17,224 tons produced in the preceding quarter. On a year-on-year basis nickel production rose 4 percent in Q2-2017.
Despite rising production, Vale Indonesia recorded net loss of USD $15.3 million in the second quarter of 2017, while sales rose slightly to USD $148 million. The net loss was attributed to sliding nickel prices.
On Tuesday (08/08) shares of Vale Indonesia rose 2.95 percent to IDR 2,440 a piece. However, so far this year the company's shares have fallen 13.48 percent.
Stock Quote Vale Indonesia - INCO: