Tsingshan Steel Invests US$ 5 B in Nickel Smelter

Tsingshan Steel Group will invest US$ 5 billion in Indonesia to build a nickel smelter and develop an integrated industry from upstream to downstream in Central Sulawesi and Southeast Sulawesi. (BLOOMBERG/MADELENE PEARSON) JAKARTA - Tsingshan Steel Group, a stainless steel manufacturer from China, will invest US$ 5 billion in Indonesia to build a nickel smelter and develop an integrated industry from upstream to downstream in Central Sulawesi and Southeast Sulawesi. MS Hidayat, Minister of Industry, said the investment will be done in two phases. First, the construction of the nickel smelter with investment of US$ 1 billion, and second, the construction of the second phase smelter for US$ 4 billion.
According to Hidayat, Tsingshan produce stainless steel. The target is in line with the government‘s policy to impose a ban on exports of raw materials from the coal and mineral sectors in 2014. The policy is in accordance to Law Number 4 Year 2009 on Mineral and Coal.
The policy applies to exports of non-renewable natural resources by applying high export duties. The non-renewable natural resources are bauxite, copper, nickel, iron ore and iron sand.
Hidayat said the policy could be realized if there is an investment in the downstream sector. Therefore, the government will encourage investments, both in the upstream and downstream sectors, through tax incentives.
In terms of Tsingshan investment, the government is considering to grant the company a tax exemption incentives within a certain time period (tax holiday) or reduction of taxes (tax allowance). However, Tsingshan will obtain tax incentives if the company partners with local investors and through concessions.
"We will discuss the matter with the Investment Coordinating Board (Badan Koordinasi Penanaman Modal), the Ministry of Energy and Mineral Resources, and the Ministry of Finance.
The tax holiday will be granted to a number of industrial sectors, such as steel and basic metals, petrochemicals, capital goods, renewable natural resources and telecommunications.
Local Partnership
Panggah Susanto, Director General of the Manufacturing-based Industry at the Ministry of Industry, said Tsingshan will partner with Bintangdelapan Group, a group of chemical, oil and gas, mining, and timber companies.
The company initially targets to build a nickel smelter with an initial production capacity of 50 thousand tons per year. In the next stage, the capacity will increase to 100 thousand-150 thousand tons per year.
According to Panggah, Tsingshan is currently conducting a feasibility study in Sulawesi. "They chose Sulawesi because the supply of raw materials are there," he said