The announcement from the Energy and Mineral Resources Ministry that Indonesia, the world’s top supplier of nickel ore, will ban shipments of nickel ore in January, drove up global nickel prices on Tuesday to the level last seen five years ago.

The commodity is exported mostly to Japan and China, and is then processed into products from batteries and stainless steel to buildings materials.

The government has argued that the decision was taken to encourage more investment in the development of smelters given that nickel miners will have to sell domestically. For big nickel miners that already operate smelter facilities, the policy will be positive in boosting their capacity. Smaller miners, however, said they would be negatively affected by the ban.

“What is the urgency [to speed up the nickel ore export ban]? Why doesn’t the government wait two more years? And who will compensate the smelter investments of local miners?” said Indonesia Nickel Miners Association (APNI) secretary-general Meidy Katrin on Tuesday, adding that such a move would jeopardize smelter investments made by local miners.

Local miners, she went on to say, often use their export quota as collateral for investors who help fund smelter development because banks are reluctant to finance the construction.

“We’re not ready yet, the government isn’t ready to provide infrastructure for smelter construction and there’s no adequate bank financing,” she stressed. “This regulation is issued just to kill national companies that build smelters.”

The Energy and Mineral Resources Ministry announced on Monday that it would ban nickel ore exports starting Jan. 1, 2020, two years earlier than the original plan.

The ministry’s coal and minerals director general, Bambang Gatot Ariyono, told the press that the ban of nickel ore exports was in line with the national plan to accelerate the establishment of smelters so that Indonesia could sell value-added nickel products such as stainless-steel slabs.

“We already exported 38 million tons up until July this year. At this rate, we would need to think about our reserves especially if we keep issuing export permits,” he said.

Bambang said the government hoped to accelerate the development of 25 ongoing nickel smelter constructions around the country to complement the 11 existing smelters, with combined input capacity of 81 million tons.

For companies that already have smelter facilities, the government’s move to accelerate the nickel ore export ban seemed to be a blessing in disguise.

Director of state-owned diversified mining company PT Aneka Tambang (Antam) Arie Prabowo Ariotedjo told The Jakarta Post on Tuesday that the short-term gain from the government’s move was that the company would enjoy a greater profit margin from selling nickel as its prices went up following the announcement of the ban.

According to the London Metal Exchange (LME), 3-month contracts for nickel were valued at US$18,620 per ton on Monday, a 4.3 percent increase from $17,850 on Aug. 30.

“Antam already produces nickel, it does not only sell nickel ore. In the coming months, we expect a greater margin from nickel while the exports of nickel ore until the end of the year will still be on track to reach its target,” said Arie.

Antam exported 3.9 million wet metric tons (wmt) of nickel ore in the first half, while its target in 2019 is to ship 5 million wmt.

The government’s policy would help narrow Indonesia’s current account deficit because it would encourage more value-added exports, adding that such a move would be a boon for other industries, Bahana Sekuritas economist Satria Sambijantoro said.

“There could be a windfall for Indonesia’s exports and nickel-utilizing industry, such as electric vehicles, as a result of the ban,” he added. (eyc)

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