China's Tsingshan Group plans to invest $2.8 billion to set up a high-capacity ferro-nickel smelter plant in Indonesia by mid-2017, with the aim of producing 2 million tons of stainless steel per year.

The plant's projected annual capacity will be equivalent to 40 percent of the capacity in Europe and 5 percent of the world's, says Huang Weifeng, vice-chairman of the board at Tsingshan.

More Chinese companies may open smelting plants in the archipelago now that it has imposed export restrictions to force mining companies to develop local smelting and processing facilities.

Based in Wenzhou, Zhejiang province, Tsingshan is the largest producer of ferro-nickel-an alloy of nickel and iron - and the second-largest stainless steel producer in China. Tsingshan began investing in Indonesia in 2009, in the China-Indonesia Industrial Investment and Cooperation Zone on the eastern Indonesian island of Sulawesi, covering an area of 1,364 hectares.

"The establishment of a ferro-nickel smelter in Indonesia is beneficial for us, as it will help us to reduce our transport costs and enhance our competitiveness," said Huang, who also is chairman of Shanghai Decent Investment, a unit of Tsingshan.

The first phase of the project was completed in March with an investment of $630 million, according to Huang, who also oversees the group's industrial park in Indonesia. It has an annual production capacity of 300,000 tons of ferro-nickel for export. The company also is building a 130,000-kilowatt power plant in the park.

Construction of the smelter project's second phase - with a total investment of $1.02 billion and a projected annual capacity of 600,000 tons of ferro-nickel - is underway and expected to be completed by the end of this year.

The third phase will reach an annual production capacity of 2 million tons of stainless steel. With a total investment of $970 million, the 300,000-kW facility is scheduled to be completed by mid-2017.

Indonesia is the world's largest nickel ore exporter, while China is the leading nickel consumer.

In 2013, China bought 70 million tons, or 99 percent of its total annual imports, of nickel ore from Indonesia and the Philippines.

Early last year, Jakarta imposed export restrictions.

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