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Traditional key player in Indonesia’s growth?

Interview - December 20, 2014

Mr. Faizal Emita, Executive Director of Asosiasi Nikel Indonesia, speaks about the strength and sustainability of the nickel industry in Indonesia and its future projections.



Newly-appointed Energy and Mineral Resources Minister Sudirman Said said that he will maintain the ban on unprocessed mineral exports, despite the legal challenge from several mining companies. How will this affect the sector? Is it an appropriate strategy to encourage foreign investors to build smelters and perform lucrative refining processes in Indonesia?

I do not truly think that this move will encourage more investments in the area of value-addition. We need to consider the market functions. We have to be clever and perhaps do some fine-tuning in the policy. We have to look at the current set of needs and the market opportunities (and maximizing them). We cannot just close our door and be on our own, nickel is an important commodity for the development and growth for the developing countries. From 2009 until the time in question, the government policies were wrong. It was confusing and has not brought us anywhere, more the other way around.

Value-addition is a must, but you have to consider the readiness of the market participants. Take chocolate industry, for instance. We may have the cacao but we need milk too, the knowledge, and the refrigeration units etc. In terms of coffee, Indonesia has the best kind, but it took 30 years to nail down the process. It has to do with each of the market participants and stakeholders to get to the point we are in today.

There is a plan to build nickel plants in the coming years.

Yes, there are a few plants are ongoing construction.

I can tell you that in terms of 350 kilo tons per annum (KTa), because of what has taken place in Chinese smelting, we are facing a price going back to 50.000 USD LME.

China is closing in 2015 for environmental reasons and they are switching to a place where the costs are lower. China needs about 800 KTa. ArcelorMittal (AM) is taking on a wait-and-see attitude as well as Jindhal. They are all taking on a wait-and-see attitude. Nobody is investing. A French investor came only to buy land. They intend to start when the prices are good, business is viable for them. Otherwise, they are not going to do anything. This is a business and economic decision. They will not be pushed around by government regulations.

We do not export at the moment. We are complying with regulations.

Why have the prices gone down?

Nickel was poised to fall into a bear market after prices tumbled this quarter on signs an ore-export ban by the world’s biggest producer hasn’t depleted supplies as fast as forecast. London Metal Exchange stockpiles are at the highest in records going back to 1979. “After overreacting to Indonesia’s ban, the market is removing the speculative froth on prices as there’s been more supplies of the refined metal and demand in China is slowing” Nickel prices will not go up until the market sees an actual shortage in ore supplies.

In your opinion, how should industry-wide policies be drafted?

This is a very sophisticated industry. We have to consider our products and how it would work in the world market. We have to consider the conditions and be involved in decisions about the industry. It should not just be at the national and ministerial level.

We have to learn more about the market. The market is brutal. We have been exporting 60 million. What we can do is export about 15 million to 25 million per year. By decreasing the number of exports every year until we have the full plant of nickel production that we targeted. We need power, infrastructure and more government support, more incentives. There is also the issue logistic and high transportation cost, which affects the price.

What can you tell us about the price of the finished product?

That is a hard question, we are working on it. Last night, we had a meeting with friends from China. International cooperation is good, but it is not always easy. Chinese, the Japanese and the European investors each require different kinds of approach. We have to be able to adapt to these changes to move forward.

How would you assess the current price trends?

The price trend would increase by first quarter next year, at the moment actually starting to decrease. We can actually win and get the money to invest in the processing industry. One can make US$8 billion in a year. This is an option that the government can consider on fine tuned policies. The state companies can consider to also be part active and involved in the processing industries in the country. The public private partnership should be pushed more.

The recent inauguration of President JokoWidodo is the country’s first election of a ‘businessman’ for presidency. He has had a history of success in his previous offices.

Yes, take Jakarta for instance. It had US$3 billion. When Jokowi came as governor, it had US$7 billion. He has a tough task ahead of him now. All eyes are on the new government. We have our constitution. We have to look to the poor and make sure they also benefit from whatever development is taking place.

What does this landmark move mean to the country?

It gives a hope for a modern, a democratic and better Indonesia. It has its beautiful side, and the side that we have to change. We owe it to our children, and the rest of the world (in terms of maintaining the peace). I am hoping that this new government can effect that change.

Indonesia is a big country with 250 million people. It is multicultural nation. People are warm and friendly. They like to smile. We have to let it grow, and do the things we have to do to allow it to grow.

We have touched upon the new policies affecting the sector. Has this affected investment?

Yes, at the moment, it is very hard to get the money to build the smelter. Investment decisions are stalled by competence issues and regulations that often change, uncertainties bring high risks for investors both foreign and domestic.

How is AsosiasiNikel Indonesia (ANI) working to address these issues?

ANI supports the sector and its players. We will roll out initiatives and make investments. We agree to handle value-addition, we have the money, and we do not want to stomp on the others.

We have had discussions with the government. The question is how much the quota is, and who gets it. I think that we have to play at a free market level. The government has to get involved enough to learn how to deal with a sophisticated industry. The law should be enforced. Inspections must be conducted.

As an expert in the field, where is the money at?

Nickel mining is a promising sector. Oil and gas is a huge industry. You may want to talk with the Indonesian Petroleum Association (IPA).

How would you describe the nickel industry?

It has the makings of a big story in the future. It hinges on how the new government will handle things. Right now, they are effectively removing all the red tape and cleaning up corruption in the country.

Direct Nickel is the first Australian company to partner with a local company to develop the country’s principal nickel laterite processing plant.

Australia’s Direct Nickel is looking for ways to finance their research for a revolutionary nickel processing.

There is an increased Australian participation in the industry. How about British participation? What unique element can they bring to the sector?

That is a good question. I got invited to Andrew Thake’s Mines and Money in London, from the 1st to the 4th of December. Thake invited me to make a speech in Hong Kong some time in March.

British and Europe do not have much engagement in mineral industries development in Indonesia at the moment. Just sporadic.

Invented in China, you have nickel pig iron (NPI), which is a low-grade ferronickel used as a cheaper alternative to pure nickel to produce stainless steel. Ferronickel has more than 20% nickel. Indonesia has its own special kind of nickel.

Indonesia is in the story. What should we call our nickel? What kind of nickel are we making? How do you buy it and how much tax do you pay? Who are our end users? What are the legal implications? There are just so many things to figure out in the future.

As with all our interviews, we would like to know more about the man behind the organization. Kindly tell us about your background.

I have a background in architecture and economics. I have been working in international organization in Luxemburg and Vienna. I joined the mining industry a couple of years ago in nickel mining.

As a specialist in the field, what would you highlight as good industry resources?

Nickel, nickel is used in 300,000 household products, architecture, medicine, transportation, ICT till aerospace and many others. Please watch a video “Imagine the world of Nickel” from the Nickel Institute. It is an informative video (youtube) about nickel. More information you get from an international nickel governmental organization, The International Nickel Study Group (INSG) is another good resource.    

What are your thoughts on the industry?

Ours is a very complicated industry structure due to historical, overlapping regulations, poor infrastructure and lack of experience, but I am positive and optimistic we can overcome these problems. That is something that people need to understand. In China, you have a long historical mining history an entire set of certifications. They work with the universities, research institutes, government and business players. We should learn from the world best mining practices.

Here in Indonesia, it has the potential to be something big in the future.