Vale struggles to find partners for nickel production in Indonesia

Nickel producer Vale Indonesia says Indonesia's recent move to allow ore exports is helping to lower global metal prices and complicating efforts to forge partnerships for new investment in smelters.

Miners around the world face persistent market weakness, thanks in part to efforts by Indonesia and the Philippines to lift export restrictions targeting their mining industries.

The resumption of nickel ore exports to Indonesia in May this year was a boon for China's nickel pig iron (NPI) producers who depend on such ore, but it posed problems for the rest of the world's nickel producers. For Vale Indonesia, this means difficulties in establishing or maintaining partnerships on several ferronickel projects on the island of Sulawesi.

Japanese miner Sumitomo Metal Mining Co Ltd partnered with Vale at a nickel refinery in Pomalai in southeast Sulawesi. But "they are now more concerned about calculating the internal rate of return because this is a $ 2 billion project," Kanter said. Another potential Chinese co-investor has decided to abandon the project for a ferronickel plant in Bahodido, Central Sulawesi, he said.

Nickel prices on the London Metal Exchange have risen about 3.5 percent since Indonesia's rules changed to $ 10,815 a tonne on Wednesday.

"If there hadn't been a change in the rules, prices could have improved," industry experts say. Nickel prices have been modest since the last rule change, but remained well below levels seen until mid-2015. Indonesia has already issued permits for 8 million tonnes of nickel ore exports, raising fears that further permits will follow, said Ratih Amri, Corporate Secretary of Vale Indonesia.