Looming Bauxite Export Ban Not Well-Thought-Out: Think Tank
Jakarta. Economic think tank INDEF fears that Indonesia might have not carefully planned the imminent ban on unprocessed bauxite ores.
A ban on unprocessed bauxite ores is set to come into effect on June 10 in a bid to drive domestic processing of the mineral. However, Indonesia may be far from ready once the ban enters into force. Indonesia’s success with its nickel downstream policy prompted the government to rush into banning exports of raw minerals such as bauxite. But the nickel value chain is incomparable to that of bauxite, according to INDEF researcher Andry Satrio Nugroho.
“Bauxite is used in the production of aluminum, … while nickel’s downstream industry is far more complex. Nickel has many intermediate products and its applications are not only limited to batteries, but also include stainless steel. ... We may be the world's largest nickel producer, but not with bauxite. International prices might not change much when the [bauxite export] ban is in effect,” Andry told a virtual conference on Wednesday.
"We have yet to see a plan on what Indonesia should focus on in developing its bauxite industry aside from processing its ore into alumina for export. We have not seen the government’s plan for the value or supply chain of the aluminum industry, including who would consume our aluminum,” Andry said.
Indonesia today only has 4 bauxite smelters. Seven out of the 8 additional smelters that are supposedly under construction are still “just open fields”. Andry wondered why the government had postponed the export bans on other raw minerals —copper, iron, lead, zinc, and anode mud from copper refining— to May 2024, while the unready bauxite industry does not get the same treatment.
Data shows that among the top 10 countries with the largest bauxite reserves, Indonesia —which ranks sixth place— is the only one to have banned the export of the ore. Indonesia’s bauxite reserves stand at 1 billion dry metric tons, with production reaching 21 million dry metric tons in 2022. Indonesia produced 1.1 million tons of alumina last year.
“I feel like the government is rushing things. [...] Indonesia’s bauxite-to-alumina ratio is also only 5.2 percent, much lower than other nations [in the top 10 list of the largest bauxite reserves],” Andry said.
According to Andry, Indonesia mostly exports its bauxite to China which will then process it into alumina and aluminum. Indonesia is also banking on the export ban to attract Chinese investors to build a smelter facility in the country with cheaper bauxite prices.
“This export ban should not simply be a solution to woo foreign investors with lower domestic prices. This is the same as selling our natural commodities at a discount,” Andry said.
Indonesia has stopped exporting unprocessed nickel ores, and the government claimed the move had been a boon for Indonesia’s economy. Exports of downstream nickel products reached $34 billion in 2022, according to government data. Indonesia, along with Australia, is home to the world’s largest nickel reserves standing at 21 million metric tons. Indonesia's nickel mine production totaled 1.6 million metric tons last year.Tags: