China Nickel Resources, listed on the Hong Kong Stock Exchange, had to admit publicly how badly it is suffering from the Indonesian government’s sudden ban on all ore exports, including iron and nickel ore.
The ban, started in January 2014, forced China Nickel Resources to halt operations at almost all of its core businesses, including a special and stainless steel and nickel-chromium alloy plant in central China’s Henan province, as well as its nickel smelter in east China’s Jiangsu province.
The root cause for all these suspensions in its Chinese operations, however, is it was unable to ship its iron-nickel ore out of Indonesia due to the export ban by the Indonesian government.
It is also safe to assume that China Nickel Resources is a known and typical case illustrating the deep trap that many investors in Indonesia’s coal and nickel mines, including individuals or privately-owned companies, are now in. But fortunately for many, not being listed companies, they do not have the obligation to expose their wounds to the public.
In 2015, China Nickel Resources suspended operations at its Zhengzhou Yongtong Special Steel plant in central China’s Henan province from late February until early July amid fierce competition in domestic steel market in general, as well as due to no more internal supplies of iron ore and nickel with the Indonesian ban, the official said.
Yongtong resumed operations gradually in early July but is operating at high costs as it has to procure iron ore from third parties inside China, the company’s interim report stated on September 1. Yongtong is designed with 500,000 mt/year special steel and stainless steel and 500,000 nickel-chromium alloy capacities.
Additionally, China Nickel’s operations at the 6 million mt/year Yiwan iron-nickel mine in Indonesia under its subsidiary PT. Yiwan Mining were completely halted for the first half of 2015 as no nickel ore could be exported from Indonesian government. The Indonesian business contributed 91% of China Nickel’s sales revenue in 2013.
Indonesia was China’s top nickel ore supply country prior to the ban, but the sudden break has enabled the Philippines to catch up, becoming China’s current top nickel ore supply source.
Sadly for the Philippines, though, its supply volume is no match to that of Indonesia, and it is unable to fill the gap left by Indonesia even though the market share is free to take on.
China’s nickel ore imports at Lianyungang, once the top nickel handling port in east China’s Jiangsu province, for example, posted a slump of 4.29 million mt year on year in nickel ore imports for H1 to 2.13 million mt in light of Indonesia’s ban and the Philippines’ inability to supply more, a port official confirmed on in late August.
Without the nickel ore supply, China Nickel’s 1 million mt/year nickel alloy plant in Lianyungang City, east China’s Jiangsu province, was idled from January to June. The plant, under the management of the subsidiary Lianyungang City East Harvest Mining Company, went into trial production in H2 2012.
To counter the impact of Indonesian policy in the long run, China Nickel is exploring the possibility of building a steel plant in Indonesia under its newly-established PT. Mandan Steel to produce rebar.
“We do not have any concrete details yet, but this will enable us to consume our resources domestically to be free from the ban,” the company official said.
Despite the similar suffering and the plan to develop downstream to bypass the Indonesian ban, very few investors have been heard to have completed constructing their nickel smelters or steel plants. It seems that the journey is not as smooth as assumed.
The links below shows a snap shot of market news from China Nickel Resources in early September :
PUBLISHED : Tuesday, 01 September, 2015, 7:56am
UPDATED : Tuesday, 01 September, 2015, 4:11pm
http://www.scmp.com/news/china/economy/article/1854311/china-markets-live-early-calls-price-forecasts-and-analyst-views
8:49am: Its tough times for China Nickel Resources, which reported an 86 per cent drop in year-on-year first half revenues to HK$28.1 million with a loss of HK$207 million attributable to equity holders. The company is behind on its debt repayments to Hong Kong banks and is negotiating a coupon payment extension with bond holders. To help with negotiations China Nickel has appointed outside financial and legal advisers
