Indonesia's domestic processing ambitions causes uncertainty for producers

A new policy study focused on the down-stream processing of raw materials has left producers and investors nervous. 

Indonesian President Jokowi has announced that the Government is conducting a (new) study of the country’s downstream processing. The long-term goal is to ban the export of raw materials (metal ores) or partially transformed commodities. This policy is expected to be released in 2022 with Indonesia expected to bring forward the ban of bauxite exports (currently planned for the end of 2023).

Sources close to Ministry of Energy and Mineral Resources (MEMR) have indicated that, similar to recent policy developments in Indonesia’s nickel sector, the Government is seeking to transform Indonesia’s abundant metallic ores (nickel, copper, gold, tin and bauxite) into processed metals.

While the policy seems targeted at bauxite, copper and tin, the biggest concern is that nickel intermediate products used in the battery supply chain for electric vehicles will be most at risk given the delays in securing partners for Indonesia’s EV battery plants. Accordingly, Commodity Insights expects that investment plans with China’s CATL and South Korea’s LGChem will be fast-tracked.