Businesses have strongly expressed concerns over the government’s decision in January 2017 to relax the ban on nickel ore exports as the move was seen as harmful to the competitiveness of smelter industries.
When the government eased the ban, which lasted for only three years, it allowed miners to export certain minerals, including low-grade nickel ore with content below 1.7 percent, in return for their commitment to establish new smelters within five years.
The government has insisted the relaxation was needed to boost the nation’s mineral processing industry and, subsequently, create significant multiplier effects to the economy.
However, Steven Brown, the general manager for business development at publicly listed nickel miner PT Vale Indonesia, argued that the country had welcomed huge investments in the mineral processing sector during the export ban period.
Investors, especially those from China, came and developed a number of new nickel smelters because they wanted Indonesia’s high-grade nickel ores to be processed into various commodities, including nickel pig iron (NPI).
“Before the relaxation, Indonesian ores were feeding Indonesian smelters. And, basically, the Chinese smelters were fed by the Filipino miners that were largely exporting 1.5 percent-grade nickel ore,” Brown said Thursday.
“After the relaxation, we began exporting 1.7 percent-grade ore to China. So the Chinese smelters are now getting a much better grade, and so they are more competitive and able to increase their NPI production.”
Brown said China’s NPI production saw a consistent decline during the export ban period, while that of Indonesia started to increase steadily. But then, after the relaxation, China’s NPI production soared once again, benefitting from the exports of nickel ore from Southeast Asia’s largest economy.
If this situation remains, Brown calculated that Indonesia would lose an NPI market share of around US$6 billion in the 2017 to 2020 period.
Nevertheless, he noted that many Indonesian nickel miners preferred to export their commodities due to an unbalanced situation in the local market, in which countless small nickel miners were competing to sell their ores to only a few large foreign smelter operators.
Subsequently, Indonesian miners were under pressure to lower production costs and selling prices so as to be able to supply those few major buyers.
“The stress on local miners is too big and the situation is unsustainable. The government eventually has to intervene over the domestic ore price. We’ve seen that happen for coal and I think it’ll happen as well for nickel ore in the domestic market,” Brown said.
Indonesian Nickel Miners Association (APNI) treasury head Antonius Setyadi concurred with Brown, saying that miners had been forced to sell their 1.7 percent-grade nickel ore to local smelters at a price of only $15 per metric ton, while the export price averaged at $35 per metric ton.
“So the price difference is $20 per metric ton. The nickel price was really destroyed by the control of the cartel,” Antonius said, adding that the nickel ore production cost alone reached around $16.57 per metric ton.
Consequently, he said many nickel miners could not afford to conduct post-mining activities such as land reclamation as it was difficult for them to pay taxes or land rent.
To make matters worse, Antonius said nickel prices were disrupted by uncontrollable illegal nickel trading.
Antonius cited data from the United Nations Commodity Trade, which shows that China received nickel ore shipments from Indonesia amounting to 11.15 million metric tons, which had a value of around $767.45 million, in the 2014 to 2016 period, when the latter had imposed its export ban.
He said there was a wide gap between the Indonesian government’s nickel export data to China and the UN data on Chinese nickel imports from Indonesia in the 2007 to 2014 period. As a result, might have suffered losses of $7.2 billion during the period.
The Energy and Mineral Resources Ministry’s mineral and coal director general, Bambang Gatot Ariyono, previously said the relaxation policy had encouraged the development of 14 new nickel smelters worth $4.3 billion with a combined input capacity of 28.53 million tons of ore as of last year.
“This [relaxation policy] is actually an incentive for investors that are committed to developing new processing facilities,” Bambang said, adding that the policy would allow Indonesia to strengthen its industrial activities.
Source: Viriya P. Singgih / The Jakarta Post
13 April 2018