Stainless steel slab exports rose to 459,502 tonnes in the first nine months of 2018, up from 302,919 tonnes for all of 2017, the industry ministry said on Monday. Hot rolled coil exports surged to 877,990 tonnes for the same period, from 324,108 tonnes for all of 2017.

Steel exports would climb due to the continued development of the Morowali industrial area, located at Indonesia's main nickel producing area on the island of Sulawesi, Harjanto said in a statement.

Morowali is targeting stainless steel production capacity of 4 million tonnes a year, he said, adding that would make Indonesia the world's second-biggest producer of the metal.

Wood Mackenzie said in a recent note it expects China steel giant Tsingshan Holding Group to "fully utilise" its 3 million tonne a year stainless mill in Morowali this year after a delay to one if its lines in 2018.

Another Chinese firm, Jiangsu Delong Nickel, may also start Indonesia's second stainless mill in 2019, Woodmac said, although a startup of its entire 2.5 million tonne a year PT Obsidian Stainless Steel facility was "optimistic".

Indonesia's large nickel laterite ore reserves are prized for the production of nickel pig iron, which is used to make stainless steel, and the country is expected to benefit from growing demand for stainless steel.

Stainless steel is expected to account for about two-thirds of demand for nickel globally this year.

But the rapid increase in Indonesia's stainless steel and nickel pig iron output has affected stainless mills globally, as well as the nickel producers that supply them.

China launched an anti-dumping probe in July that included Indonesia, after complaints of damage from its local industry. Almost two-thirds of China's stainless imports came from Indonesia in 2017, up from just 5 percent in 2016 and zero in 2015, according to the complaint.

(Reporting by Fergus Jensen, Additional reporting by Wilda Asmarini; Editing by Richard Pullin)

By Fergus Jensen