By Donke Ridhon Kahfi & Justin Huang
A. Background
Nickel is one of the most prominent and versatile mining resources, it is used for various industries, including but not limited to; stainless steel, batteries, and electronics. Indonesia is the largest nickel producer, with 1,6 millions metric tonnes in 2022 and deemed to have 21 millions metric tonnes in reserve.[1] These both show the significance of nickel as a mining resource and the potential that Indonesia has to exploit and utilize Indonesia’s nickel abundance. Furthermore, nickel usage is becoming increasingly massive, remembering the emergence of Electric Vehicles (EV), whereby nickel is one of the main components in manufacturing EV batteries.
Given this phenomenon, this article will attempt to examine the actual nickel management policy in Indonesia. We will touch upon several points of discussion vis-a-vis Indonesian nickel management policy, such as; 1) General policy on nickel resources in Indonesia, focusing on the downstream policy and 2) Opportunities that arise from such policy on nickel ore.
B. Laws and Regulations
Discussing on nickel resources policy, there are number of laws and regulations that governed this particular matter, namely:
- Law Number 4 of 2009 on Mineral and Coal Mining as amended by Law Number 3 of 2020 (Minerba Law)
- Government Regulation Number 96 of 2021 on Implementation of Mineral and Coal Mining Activities (GR 96/2021)
Through these regulations we can assess the nickel export policy implementation in Indonesia.
C. Nickel Resources Regulation in Indonesia
Regulation on Nickel Downstreaming Policy in Indonesia
In recent years, there has been a push to increase the downstream processing of nickel in Indonesia. The government has introduced a range of policies aimed at encouraging the development of a domestic nickel processing industry, including export restrictions, tax incentives, and regulations mandating the use of local content in nickel processing. These are the efforts made by the government based on applicable laws that will be explained further.
Basically, the Minerba Law provides a mandate for mining business actors, namely those who have Mining Business Permits (IUP) and Special Mining Business Permits (IUPK) to carry out Processing and/or Purification of Mining Minerals in the country (domestically).[2] Thus, this regulation also applies to nickel mining which is included in mining minerals. This has the implication that nickel must be purified domestically, so that it should not be just in a state of raw nickel. This stipulation is also stipulated in the implementing regulation, that is the GR 96/2021, which enable the processing and/or purification can be done Processing and/or Purification can be carried out individually or in collaboration with IUP/IUPK holders or other business not integrated with mining activities.[3]
Furthermore, the government also determined that the obligation of mineral processing and/or purification must be carried out in a 5 year period since the law was enacted in 2009.[4] This is what becomes difficult because in reality the implementation and execution of these regulations have not been followed by all nickel mining business actors. Where the practice of mining nickel without processing and/or refining is often carried out. The raw nickel mining results are then exported abroad, and not the nickel that has gone through processing and/or refining as required by law.
Opportunity that arise
The fact that Indonesia is exporting raw nickel means that there is no additional value to the metal, making it less lucrative for Indonesia. Given that nickel export income is not maximized, even though it can and should be given Indonesia’s abundant nickel supply, this is not strategically advantageous for the Indonesian economy. This pushed the government into formulating and implementing Indonesian nickel export restrictions, with hope that Indonesia could maximize the mining resources it has.
This can be seen as an opportunity. The policy made by the government vis-a-vis nickel export holds great potential. In the current era where the use of nickel is increasing, for example it is used as a raw material for making electric vehicles (EV) batteries. Indonesia, which has many nickel resources, is feasible and should maximize this potential. Indonesia has the potential and can become a prominent player in nickel in the world, and this will significantly increase GDP for Indonesia, because it can provide added value to nickel resources. And not only that, by implementing nickel processing and/or refining, this means that there is a transfer of technology, where Indonesia can be independent in managing its own mining products and not depend on other parties.
D. Conclusion
In conclusion, Indonesia has made significant efforts to increase the downstream processing of nickel through various policies and regulations. The Minerba Law provides a mandate for mining companies to process and purify minerals domestically, including nickel. However, the implementation of these regulations has not been fully followed by all nickel mining business actors. Nonetheless, the restriction on nickel exports presents an opportunity for Indonesia to maximize the value of its abundant nickel supply and become a prominent player in the world’s nickel industry. By implementing nickel processing and refining, Indonesia can transfer technology, be independent in managing its own mining products, and significantly increase its GDP. Therefore, it is important for the government and mining companies to work together to fully utilize Indonesia’s nickel resources and reap the benefits of downstreaming.
[1] Pistilli, M. (2023) Top 9 nickel-producing countries (updated 2023), INN. Available at: https://investingnews.com/daily/resource-investing/base-metals-investing/nickel-investing/top-nickel-producing-countries/ (Accessed: April 4, 2023).
[2] Minerba Law, Article 103
[3] GR 96/2021. Article 167
[4] Minerba Law, Article 107