The nation’s largest nickel producer, PT International Nickel Indonesia (Inco), plans to dismiss about 500 employees as the global slump forces the company’s biggest shareholder to pare costs back to a minimum, an Inco source said on Monday.
“The company has sent a letter to the Manpower Ministry proposing the layoffs,” the source, who declined to be named, told the Jakarta Globe, adding that the plan was mainly due to the external situation faced by its main shareholder, Vale Inco.
“Vale has many companies worldwide and some have shut down their operations due to the global recession, some have laid off employees,” the source said.
The source added that Vale has opted to maintain its profit margins through stringent cost-cutting worldwide, including at Inco. Vale’s nickel mining, processing and smelting operations at Sudbury, Canada, have been closed since June 1 because of the recession and are scheduled to restart on July 27 following maintenance work, Bloomberg reported.
An Inco employee at the company’s Sorowako nickel mine in South Sulawesi, who requested anonymity, confirmed the news, saying that the company’s workers have been aware of it for some months now.
“Management said that it’s part of a regeneration process,” he said. “Inco said that it is the right time, especially with the crisis, to replace its older employees with younger ones.”
He added that a formal announcement of the layoffs was expected in the coming weeks.
News portal Detik.com reported on Monday that the government would ask Inco to reconsider the redundancies. “We will ask them to avoid the layoffs,” the news portal quoted Bambang Setiawan, the Energy and Mineral Resources Ministry’s director general of minerals, coal and geothermal energy, as saying.
Bambang said the ministry had yet to receive Inco’s report on the layoffs, but stressed that it appeared unjustified as nickel prices have rebounded lately.
Inco booked a profit of $17.2 million in the three months to March, a drop of 87.7 percent compared with $139.6 million in the same period last year.
Over the period, company sales declined by 68 percent, with nickel-in-matte production falling 20 percent, while average nickel prices declined by 60.7 percent to $8.31 a metric ton, from $21.18 a metric ton the previous year.
Arif Siregar, Inco’s president director, earlier said the company would significantly reduce operating and production costs this year in response to lower demand.
The company has also reduced its planned 2009 capital expenditure by more than a quarter to $166.4 million from the $228.8 million originally planned. Inco shares closed down Rp 200, or 5.26 percent, to Rp 3,600 (35 cents) in Jakarta on Monday.