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Vale unit struggling to find nickel smelter partners after Indonesia rule change

The recent shift in Indonesia's policy to allow ore exports is posing a challenge for Vale SA unit PT Vale Indonesia Tbk., Reuters reported Aug. 9.

The resumption of Indonesian nickel ore exports in May is helping to keep global prices of the metal low, but is complicating efforts to create or maintain partnerships for smelter investments.

Vale Indonesia CEO Nico Kanter said a few partners have told the company that they are pulling the plug or delaying decisions amid pricing and regulatory uncertainties.

Japan's Sumitomo Metal Mining Co. Ltd. is partnering with Vale on a nickel processing plant in Pomalaa in Southeast Sulawesi, but Kanter noted that Sumitomo has now flagged concerns about the calculations of their internal rate of return, due to it being a US$2 billion project.

Another potential Chinese co-investor decided to withdraw from a ferronickel smelter project in Bahodopi, Central Sulawesi, Kanter said.

The ban on unprocessed ore exports, implemented in 2014, attracted at least US$6 billion in nickel smelter investments, Vale Indonesia Corporate Secretary Ratih Amri said.

However, since the ban ease, Indonesia has issued permits for 8 million tonnes of nickel ore exports, fueling concerns that further permits will follow, Amri said.

As of June, about half of the Indonesia's newly constructed nickel smelters were shuttered as a result of the market's shaky prices.

However, the country's mining ministry denied that the closures were driven by the change in the ore export policy, and "uneconomical technologies" were to blame for it, according to Coal and Minerals Director General Bambang Gatot.