Indonesian nickel producers agreed on Tuesday to immediately cease ore exports, causing a market shock, which pushed up global prices of the metal and boosted share prices of local producers. (GA Photo/Mohammad Defrizal)
Indonesia Abruptly Halts All Nickel Ore Exports
BY :RANGGA PRAKOSO
OCTOBER 29, 2019
Jakarta. Indonesian nickel producers agreed on Tuesday to immediately cease ore exports, causing a market shock, which pushed up global prices of the metal and boosted share prices of local producers.
The abrupt halt in exports came two months earlier than the scheduled date of Jan. 1, 2020 the government's announced last month – a deadline already brought forward by two years. This plan sparked a surge in ore exports to beat the new deadline, undermining the country's goal of adding value to the metal used in the production of rechargeable batteries, mainly for electric vehicles.
"This decision is not based on any government ruling or technical letter from the ministry. This is a mutual agreement [between producers] and wise thinking to add value to commodity exports," Investment Coordinating Board (BKPM) head Bahlil Lahadalia said after a meeting with producers on Monday.
Nickel futures rose 1.7 percent, while the share price of Vale Indonesia, the country's largest nickel producer, increased 5 percent on the Indonesia Stock Exchange on Tuesday morning.
Bahlil said local smelters would buy out delivery contracts due until December from overseas buyers – mainly from China – to ensure that no parties are disadvantaged by the decision. The government would mediate between the parties if any issues arise, he said.
Prihadi Santoso, chairman of the Processing and Smelting Companies Association (AP3I), welcomed the agreement to halt nickel ore exports and said local smelters were committed to buy up all the ore.
Indonesia currently has 14 operating nickel smelters and 27 under development.
"We have met and we are united. We only want the Republic of Indonesia to succeed. This is a time to stop exporting and to manage [our resources] domestically," Prihadi said.
Alexander Barus, chief executive of Indonesia Morowali Industrial Park – an AP3I member – said smelters needed an estimated 25 million metric tons of ore per year for processing.
Indonesia is the world's largest nickel producer, but with proven reserves of only around 700 tons, according to the Ministry of Energy and Mineral Resources.
Prior to the export ban, Indonesia committed to exporting up to 76 tons each year, which the ministry said could deplete the resource in less than a decade. The country still has a potential 2.8 billion tons of nickel ore when accounting for unproven reserves, but this requires investment and exploration.