PT Gunbuster Nickel Industry (PT GNI), one of Indonesia’s largest nickel smelters, is on the brink of a complete shutdown just months after the collapse of its Chinese parent company, Jiangsu Delong Nickel Industry.

PT GNI began its Indonesian operations in 2022 with an annual capacity of 1.8Mtpy nickel pig iron (NPI). In January, production was scaled back by 30%, and by February capacity utilisation had fallen to just 30%, equating to a loss of about 10kt nickel. Should these trends continue, production may cease entirely.

The financial fallout from the parent company’s collapse has destabilised PT GNI, leading to delayed payments to local energy suppliers and difficulties securing nickel ore. Additionally, persistently low nickel prices, intense competition from other major NPI producers such as Tsingshan Group, combined with China’s economic slowdown, have further eroded its profitability. China First Heavy Industries (CFHI), a partner of Delong, disclosed that Indonesia Delong’s 2023 losses reached approximately 2Bn RMB (US$276M).

In addition, Indonesia Delong holds interests in three other NPI operations in its North Morowali industrial area. These include PT Virtue Dragon Nickel Industry, a JV with CFHI, offering a capacity of 600ktpy NPI; PT Obsidian Stainless Steel, a JV with Xiamen Xiangyu providing a 2.5Mtpy NPI; and PT Nadesico Nickel Industry, a JV with CNGR offering over 100ktpy Ni-in-NPI and -matte. Together, these four projects are projected to account for 20% of Indonesia’s refined nickel production in 2024, with PT GNI contributing 9%.

A total shutdown at PT GNI would force ore suppliers to seek alternative smelters, a transition fraught with challenges. Suppliers must consider facility capacities, transportation costs, and compatibility with ore quality requirements. It will partly cut Indonesia‘s NPI supply to China and mitigate oversupply in China’s stainless steel sector, which suffers from subdued domestic demand and new tariffs from the USA, Vietnam and South Korea.