The government relaxed its export ban on mineral ores in January. However, miners are only allowed to export low-grade nickel ores with content below 1.7 percent and washed bauxite with an aluminum oxide content of 42 percent or more in return for their commitment to build a new smelter within the next five years.

As a result, the government has recorded throughout this year committed investment of $4 billion for the development of four bauxite processing facilities with a combined input capacity of 13.76 million tons of ore. All of these facilities will process bauxite into smelter-grade alumina, the raw material required to produce aluminum.

Furthermore, various investors have also committed to developing 14 new nickel smelters worth $4.3 billion with a combined input capacity of 28.53 million tons of ore. Of the new facilities, eight will produce nickel pig iron, while the remainder will generate ferronickel.

“We will monitor the progress of each smelter every six months. If an investor fails to meet the targeted progress, we will revoke their export permit,” the Energy and Mineral Resources Ministry’s mineral and coal director general Bambang Gatot Ariyono told a press conference on Wednesday.

As stated in the Energy and Mineral Resources Ministerial Decree No. 35/2017, an independent body will monitor the progress. If the progress is less than 90 percent of the original six month target, the export recommendation can be annulled. Bambang noted that the government also intends to revise the decree to include an undecided financial penalty for those who violate their commitments.

At present, the country operates 13 nickel smelters worth $5.03 billion with a total input capacity of 33.83 million tons of ore.

There are also two other nickel smelters that have halted operations in the past two years, partly because of the bloated price of coking coal that is used to fuel such smelters.

As a result, there will be a total of 29 nickel smelters in the country within the next five years, raising concerns over the nickel supply for the facilities.

Nonetheless, Bambang claimed the country’s nickel reserves would not be depleted until 2125.

Last year, Indonesia’s measured nickel resources stood at 1.43 billion tons, while its proven nickel reserves were at 238.64 million tons.

“But we still need to discuss with the Industry Ministry over the projection of domestic demand for such [semi-processed] nickel products. We will take such a projection into account in deciding whether we will halt new investment for developing another nickel smelter or not,” Bambang said.

This year, the ministry issued 14 recommendations for miners to export 22.98 million tons of nickel ore and six recommendations to export 14.9 million tons of bauxite ore. However, as of today, realized exports have only reached 3 million tons for nickel and 696,616 tons for bauxite.

Besides nickel and bauxite miners, investors holding the special mining license (IUPK) are also able to export semi-processed commodities under the current policy.

Holders of the contract of work need to undertake a contract conversion before they can obtain an export recommendation.

Gold and copper miner PT Freeport Indonesia (PTFI), which has been granted a temporary IUPK valid until Jan. 10, 2018, exported 433,000 tons of copper concentrate or 39 percent of the quota set by the government within the February to August period.

In return, PTFI has committed to building a new copper smelter worth $2.2 billion in Gresik, East Java, though there has been no significant progress in its development as of today.

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