PT Multi Nitrotama Kimia (MNK), Indonesia’s leading provider of mining explosives and blasting services, has entered the underground blasting services for tunneling in hydropower projects as part of market diversification strategy amid the lingering mining industry downturn.
MNK sees demand for blasting services from the coal industry to stay low as mining companies delay expansion plan, or even slash down coal production target. The drop in coal prices has pushed the miners down to rock-bottom level and forced them to take survival mode.
“We try to catch up with the market demand. When the mining sector is weakening, we still maintain our existence but also look for opportunities in other sectors because we do not know when the situation will improve,” MNK’s President Director Charles D. Gobel said to CoalAsia recently.
Incorporated in 1987, MNK has been granted permit to produce and distribute explosives since 1991. The production of ammonium nitrate (AN), which is the raw and main material to make explosives, began in 1990. The company has now maintained itself a key provider of explosive services for mining companies.
MNK intensifies communication and maintains strong partnership with its customers in mining industry by supporting their efficiency initiatives and helping to find ways to survive in the current situation.
“However, we also want to diversify our business to other sectors, particularly quarry and underground tunneling for hydropower projects,” MNK’s Sales & Services Director Wawa Jaka Sungkawa said.
Blasting services for tunneling in hydropower projects is part of MNK’s initiative to tap new opportunities in other sectors than mining. The company also realizes the lucrative business in infrastructure projects, such as hydropower and road.
“Blasting service for tunneling in hydropower project is the same as underground mining. We are currently running some tunneling projects in Cianjur, Aceh and Medan. We are also discussing plan for tunneling project in Jambi,” Wawa said.
The tunneling in hydropower and roads projects require more efficient drilling and blasting services as it has to break through hard rock formations. Drilling and blasting for tunneling projects, according to Charles, will not be effective in soft rock formation as it keeps collapsing.
Amid the current weak demand for AN in the mining sector, MNK tries to target new markets by selling nitric acid, a raw material of AN production, for the chemical industries. MNK produces nitric acid and gets ammonia supply from fertilizer firm PT Pupuk Kujang. The processing of nitric acid and ammonia produces AN.
MNK also eyes market opportunities in quarry for blasting services as infrastructure development, particularly roads, needs stones supply from quarries. Manual mining in quarry, according to Charles, only works for small scale mining but large scale quarry requires blasting services to be competitive.
In addition, MNK is currently developing a non-electric detonator (Nonels) assembly plant at the Integrated Explosives Center in Handil, East Kalimantan province. Initial production capacity is targeted at 2.3 million pieces of accessories per annum.
Nonels can be used either in open mining (surface mining), or in underground mining such as in gold, nickel, coal and other mineral mines. “We will soon be able to produce nonels,” Wawa said.
Technical services
As the only integrated commercial explosive company in Indonesia, MNK provides end-to-end explosive solutions that cover from explosive supply to blasting services. The company owns two explosive plants namely MNK-1 and MNK-2 and also full range of licenses for producing and transporting explosives in the rigidly-regulated industry.
“We have highly competent experts and provide technical services for our customers who currently implement efficiency initiatives. In fact, our technical service is free of charge,” Wawa said.
Technical services of MNK cover technical assistance for customers in determining the explosive requirement and application for specific project. Prior to blasting phase, MNK conducts technical analysis, such as rock characteristic, blasting pattern and spacing burden in order to achieve more optimal blasting result.
“For blasting, we should not use too much explosives as it may cause unexpected fragmentation and inflict more costs for customers,” he said, adding that MNK also offers tailor-made blasting solutions. The technical service provides added-value for customers as it offers precise explosive requirement for blasting.
In coal mine blasting, for example, the fragmentation will determine the cost structure of coal processing in crusher plant. If the size of coal is too big, the crusher will work harder that will consume more fuel and spare parts. On the other hand, if the size of coal is too small, the crusher will not work optimally.
MNK aims to support its customers by providing more efficient and optimal drilling and blasting which eventually reduces total production costs. A more efficient mining company means greater competitiveness.
“This is part of MNK’s corporate transformation from a merely explosive supplier company to an integrated commercial explosive company,” Charles said.
Oversupply market
Unfortunately, Charles said that the domestic explosive industry has been hard hit not only by weak demand from the mining sector, but also oversupply situation in the market. versupply of explosive materials according to Charles, also occurs globally due to the low commodity prices environment.
Charles revealed that Australia has 500,000 tons per year of AN excess supply and China has 1.5 million tons per year of AN oversupply. For Indonesia, he said that domestic AN consumption was 400,000 tons and the total domestic production capacity was 500,000 tons in 2015.
“The economic-scale of Indonesia’s explosive market is more than enough and it is expected that AN consumption trend will keep declining in 2016,” he said. Amid low commodity prices, according to Charles, mining companies prefer suspending their expansion plans, or even reducing their activities.
Charles also highlights the relatively low utilization of national AN production capacity due to oversupply condition in the domestic market, worsened by the inflow of import. “The national AN producers utilization is only about 50 percent,” he said.
The number is derived from total domestic consumption of 400,000 tons in 2015 subtracted with 130,000 tons of AN imports and the result is 270,000 tons. The 270,000 is a little more than 50 percent of total domestic production capacity at 500,000 tons per year.
Wawa confirms that the oversupply condition and inflow of imports have negatively affected the local AN producers. “We want the government to help local companies by temporarily stopping AN import and to reopen it when the AN demand recovers,” he said.