The government previously allowed miners to export low-grade ore until 2022, so they could use the proceeds to build local smelters, as required. (Antara Photo/Jojon)

Indonesia Will Halt Nickel Ore Exports Earlier Than Planned


SEPTEMBER 02, 2019

Jakarta. The government has issued a new rule that would ban exports of nickel ore from next year, as part of a latest attempt to boost processing capacity in the local industry. 

It first imposed a ban in 2014 to force miners to process the country's mineral resources domestically. Three years later, the government decided to give miners leeway and allow them to export low-grade ore until 2022, so they could use the proceeds to build local smelters, as required.  

However, Energy and Mineral Resources Minister Ignasius Jonan has now issued a new regulation, only allowing these exports to continue until the end of this year.  

Ministry spokesman Agung Pribadi confirmed the ban over the weekend and said more detail on the new regulation would be announced on Monday. 

"There will be a press conference on that," he said.

Vale Indonesia, the country's largest nickel producer, earlier voiced support for the plan, noting that most of the country's low-grade nickel ore exports end up being stockpiled in China. Chinese manufacturers use the nickel to produce rechargeable batteries – a key component in the electric vehicle industry, which Indonesia wishes to develop. 

Shares of Vale and state-controlled Antam traded 15 percent and 5.6 percent higher, respectively, on the Indonesia Stock Exchange (IDX) on Monday, following news of the plan. 

Meidy Katrin Lengkey, secretary of the Indonesian Nickel Mining Association (APNI), said the lobby group was concerned about the ban, as it would deprive members of a source of key funding to develop local smelters. 

"We've been constructing smelters since 2017, expecting to complete them by 2022. In 2019, the government said we could not export anymore. We have built the foundation and ask for the government's commitment. We are carrying out the development, [and funding it] from export proceeds," Meidy said. 

There are 51 companies currently building smelters in Indonesia, 15 of which are already operational. 

Meidy said miners can sell their ore to local smelters, but at a lower price than on the international market. Payment by local smelters is also usually late. 

This means miners that have yet to complete their smelters get less revenue, which makes it more difficult for them to pay for smelter construction. 

Coordinating Maritime Affairs Minister Luhut Binsar Panjaitan told CNBC Indonesia last week that the government planned to issue a benchmark price for nickel ore to address the pricing issue.  

Jonatan Handoyo, founder of the Indonesian Mineral Processing and Purification Association (AP3I), said the regulation was a necessary move to correct previous policy.

He said allowing low-grade nickel exports had accelerated production by Indonesian mines, potentially leaving the country with small reserves by the time the smelters come on stream.  

"The government took the most logical step. It is correct, despite being five years late," Jonatan said.