Officially announced by President Joko “Jokowi” Widodo on Wednesday, the export prohibition will be imposed on washed-bauxite products, a tad more highly valued than raw bauxite, which the country had stopped exporting for many years.

The decision also reaffirms what has been underlined in 2020 through the Energy and Mineral Resources Ministry (ESDM) regulation, stipulating that miners can only export their washed bauxite no later than June 10, 2023.

Jokowi is adamant that the ban ensures bauxite to be processed and refined domestically prior to being shipped overseas, therefore raising its export value and eventually benefiting the country. 

Following the ban, he estimates annual state revenue from the bauxite industry would jump by twofold to about US$3.97 billion (Rp 62 trillion).

“The government will remain consistent in pushing for local downstream industry,” Jokowi told reporters during a press conference in the state palace, on Wednesday.

Read also: Going heavy on metals: Jokowi vows to keep minerals at home

However, the government’s determined plan is faced with strong resistance from businesses, who argue that local bauxite downstream industries are still unprepared, insisting the ban should be postponed for a couple more years. 

A. Rizqi Darsono, head of Permanent Committee on Mineral and Coal at the Indonesian Chamber of Commerce and Industry (Kadin), explained local industries could only process 14 million tonnes of bauxite into alumina a year with current refinery capacity from 4 smelters.

The number of alumina production is roughly less than a third of the amount of bauxite produced by miners in 2022, he said, noting that the gap would put pressure on local price.

“The policy will lead the local bauxite price to fall, hurting local miners, while other countries will benefit from a surge in international bauxite price,” Rizqi told The Jakarta Post on Wednesday.

Indonesia will in fact have at least 8 new smelters in the pipeline, Rizqi said, but the progress has been hampered due to the last two years of COVID-19 pandemic. 

With the current slow progress, he believes the new smelters will need another two years before they are prepared to take on the export ban.

“If the government insists [on banning washed-bauxite exports], starting in June 2023, I don’t think we could make it,” Rizqi said.

Ahmad Zuhdi Dwi Kusuma, mining analyst at state-owned lender Bank Mandiri, also said that Indonesia’s capacity to process raw bauxite to alumina was still limited, let alone to aluminum.

It was likely that the ban would only result in the spike of alumina production, which was just one level above raw bauxite, before it would be exported again, as most of the facilities processing to aluminum would only be ready as early as 2027, he said.

“We simply cannot absorb all alumina produced locally. It’s already full capacity,” he said.

The government once estimated Indonesia would only be able to process 2 million tonnes of alumina to aluminum in 2027. Assuming the country can process 26 million tonnes of raw bauxite, it will produce nearly 10.7 million tonnes of alumina, ESDM’s 2020 booklet shows.

In addition, Indonesia is only ranked sixth in countries with the largest bauxite reserves, according to USGS data. Therefore, Zuhdi said it would make the bauxite ban less effective compared to the nickel-export ban, while also complicating local downstream industries further.

“We are not the world’s top bauxite players [unlike for nickel]. When we ban the exports, investment [on bauxite downstream industry] may not come as quickly [as on nickel’s],” Zuhdi said.

Zuhdi suggested the government gradually banned the bauxite exports, instead of directly shutting them down altogether, to prevent unwanted effects such as hampering investment.

Read also: Indonesia admits defeat in WTO nickel-export dispute

Asked whether the ban would result in another dispute at the World Trade Organization (WTO), Zuhdi considered it possible but unlikely, as Indonesia’s bauxite exports had little significance to the world market.

China has been the only importer of Indonesia’s bauxite since 2014 with more than US$628 million in value last year, Statistic Indonesia (BPS) data show. To the contrary, nickel’s importers are more diversified, and include European countries.

In China alone, Indonesia only contributed less than 17 percent of the country’s bauxite imports in 2022, making Indonesia only the third-largest supplier after Guinea and Australia that dominated 51 and 31 percent of the Chinese market respectively, according to United Nations Comtrade.

“So, if Indonesia bans the [bauxite] exports, China can just re-source them from elsewhere,” Zuhdi said.

Donna Gultom, trade and public-policy expert from Center for Indonesian Policy Studies (CIPS), said on Wednesday that it is still premature to say if China would report Indonesia to the WTO. She hopes that China would instead choose to invest in bauxite downstream industry in Indonesia.

Despite doubts from industries, the government is adamant about carrying on with the policy as President Jokowi “Joko” Widodo stated that the ban would take place next year anyway; it “does not matter if the industry is only half ready”.

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