Saturday, April 26, 2014

Iron Ore in Indonesia: Much Ado About …? – Final Part


Iron Ore in Indonesia: Much Ado About …? – Final Part

Here I would like to show, that despite strong external demand, internal Indonesian industry may consume a lot of iron ore production. As I mentioned before, Indonesia has 362,564,042 tons of primary iron ore deposits – with projected exploitation for 52 years. In the previous post I showed some data on the available types of ore. Here is what this is intended to be used for.

There is a requirement of 4.5 million tons of primary iron ore (hematite or magnetite) that is needed to meet national crude steel capacity (6.5 mill. tons/year) and national sponge iron production capacity (2.3 mill. tons/year) – thus  amount of primary iron ore that should be supplied to cover the sponge iron shortage will be 6.94 million tons per year.
According to the Ministry of Industry the projections for the steel industry requirements look like this:

Iron sand in Indonesia is used for cement industries. Projections show that the iron sand production lags as compared to demand:
Laterite iron ore (limonite) mostly is happening as nickel mines over layer or overburden -- has low iron content; thus it was not utilized yet as raw material for steel industries. However, for the future, major Indonesian producers of nickel (PT. INCO and PT. Antam Tbk) are planning to carry out hydrometallurgy process for the limonite ore which is lower cost in energy as well as capable to treat lower content of nickel in the ore. Another good potential for limonite is the use as coal liquefaction catalyst. This graph shows projections of Indonesia limonite consumption for coal liquefaction.

Thus, there is a good reason to believe that iron ore shall be in high demand internally for the nearest years. Some of investors might be cooled off a bit by the fact that according to the current legislation after five years of operations the iron ore produced should stay in the country and is prohibited from export. The data above shows the internal demand.  Therefore it is very worthwhile to make a conclusion that investments in iron ore in Indonesia are really attractive – both from the international commodity market perspective, and from internal demand.

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