JAKARTA/SYDNEY, Sept 4 (Reuters) - China's Tsingshan Group expects to start production at its Indonesian nickel pig iron smelter as soon as January, becoming the second plant to ramp up since the country's new mineral processing laws came into force at the start of the year.
"Hopefully by October or November we will have started commissioning," said Slamet Panggabean, finance manger of Tsingshan's local joint venture partner Bintang Delapan Mineral, referring to the firm's pilot smelter project in Morowali on the Indonesian island of Sulawesi.
"The plan is for production (to begin) in January or February."
As part of a strategy to reap more value from its mineral wealth, Indonesia banned ore exports in January as it pushed its nickel and copper miners to set up metal processing plants. The move has driven up London Metal Exchange nickel prices by a third so far this year.
Stocks of nickel pig iron at China's stainless steel makers are running down, leaving them exposed to a supply gap next year and fuelling the need to build smelters in Indonesia as quickly as possible.
Tsingshan, China's second largest stainless steel company, was one of the few firms to act when the law was enacted in 2009 and is well ahead of other nickel pig iron producers, many of which held back on hopes the ban would be rolled back.
Output at the joint venture, Sulawesi Mining Investment, is expected to ramp up slowly and is unlikely to reach name plate capacity of 300,000 tonnes of nickel pig iron in the first year Panggabean said.
The group is currently preparing foundations for the planned second phase of the project, he added. This would add a further 600,000 tonnes of output capacity to the facility, which was partly funded by a $384 million loan from China's policy lender State Development Bank.
Some production could even start as early as October, two sources told Reuters.
"(They) already tested the facilities in last month, so I think production in October is possible," said one of the sources who is familiar with the operations but is not authorised to talk to the media.
Rival producer, PT Cahaya Modern Metal Industri, began output at the end of 2013 and has already begun exports to China, a source with knowledge of the operations said.
Another producer, PT Indoferro, which began NPI production in 2012, is on track to finish an expansion project by the end of 2015 that would lift output to 12,000 tonnes of nickel in pig iron from 8,000 tonnes annually at the moment, an company official said.
Vale Indonesia processes all of its nickel ore at its four smelters in South Sulawesi, which have a capacity of more than 70,000 tonnes while Indonesia's second-biggest nickel producer, PT Aneka Tambang (Antam) exports from its three ferronickel smelters.
China's stainless steel makers have largely turned to lower grade Filipino ore, which they are blending with their stocks in order to make them last. This week a Philippine senator urged the country to halt exports of unprocessed mineral ores.
Additional reporting by Fergus Jensen in JAKARTA; Reporting by Melanie Burton