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Indonesia to uphold ban on key mineral exports
The government has sent a strong signal that it will maintain its ban on nickel ore and bauxite exports despite pressure to seek alternative sources of revenue amid the weakening global economy
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The government has sent a strong signal that it will maintain its ban on nickel ore and bauxite exports despite pressure to seek alternative sources of revenue amid the weakening global economy.
On Wednesday evening, interim Energy and Mineral Resources Minister Luhut Pandjaitan announced that nickel ore with a low grade of 1.8 percent was also unlikely to be included in the government’s planned relaxation of an impending export ban on unprocessed mineral ores, which will be implemented from Jan. 12.
The ban, which was originally meant to start in 2014, was set up by the administration of former president Susilo Bambang Yudhoyono in the hope that it would push the development of the downstream sector, or the construction of smelters, which would create added value for the domestic economy while commodity prices remain low.
Luhut, who also serves as coordinating maritime affairs minister, explained that a study conducted by the government showed that the downstream development of the nickel industry had been running successfully as nickel products were being widely exported across the globe.
“Many products that use nickel in production, such as stainless steel, have been successfully exported. China imports almost 60 or 40 percent of it from us and has even established its own stainless steel industry here. Why would we need to export [nickel ore] anymore if we can process it domestically?” he said, adding that he had seen a similar trend with bauxite, the world’s main source of aluminium.
There are currently 20 smelters dedicated to ferronickel, nickel pig iron and nickel hydroxide, with national demand of 41.6 million wet metric tons (WMT) of nickel ore per annum. Data from the Processing and Smelting Companies Association (AP3I) shows that Indonesia holds 21 percent of the nickel global market share.
Despite the impending ban, a study by Fitch Group’s BMI Research shows that Indonesia’s nickel mine production has the highest growth rate compared to other countries at 10.6 percent per annum from 2016 to 2020, with production expected to reach 296,000 tons that year.
Luhut said the government was unlikely to allow exports of rare earth minerals even though Indonesia does not yet have the technology to process them. He argued that rare earth minerals were not widely available across the globe and Indonesia had several potential reserves.
Separately, state-owned diversified miner Aneka Tambang (Antam) said it supported the government’s plan to uphold the complete ban on nickel ore exports although it would prefer to export low-grade nickel as it was economically unfeasible for the firm to process it in the country.
“Processing nickel domestically with a grade of 1.8 percent and below is not economically feasible for Antam to do. The idea is to utilize this waste in order to create revenue,” Antam corporate secretary Trenggono Sutiyoso told The Jakarta Post on Thursday.
Meanwhile, AP3I deputy chairman Jonatan Handojo applauded the prospect that nickel ore exports would remain banned next year. He explained that weak nickel prices would drop even further if Indonesia continued to allow unprocessed nickel ore to be exported next year while China’s demand remained low.
However, he questioned the government’s potential plan to ban rare earth mineral exports as commodity prices remained high in the global market and Indonesia did not have the technology to process the minerals.
“As the prices of the rare mineral still high we can also implement fantastically high export duties to create more revenue for Indonesia,” he told the Post.
—JP/ Fedina S. Sundaryani
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