Three months after the introduction of a ban on raw mineral exports in Indonesia, officials have shrugged off concerns over the negative impact the policy may have on future overseas demand and on hurdles in the government's attempts to create value-adding downstream industry.
According to Indonesia Energy and Mineral Resources Ministry director general for minerals and coal R. Sukhyar, as the largest supplier of low-grade nickel ore to China, Indonesia will not likely feel the pain from a looming plan by the world's second-largest economy to cut its reliance on Indonesian ore in response to the ban.
After visiting China last week, Sukhyar told The Jakarta Post that investment from Chinese companies would continue flowing in, particularly to finance smelters for processing nickel, bauxite and alumina.
"China will keep looking for replacement supply from Africa and the Philippines. However, the amount will be limited to around 40 per cent of their demand as we remain the biggest supplier," said Sukhyar.
"That's why they want to invest in smelters here."
On Jan 12, the government issued a regulation banning the export of unprocessed nickel and bauxite and imposing export duties on other semi-processed minerals.
The government said the ban was aimed at stimulating domestic smelting and processing capacity, which would add value to the country's mineral exports, and thus contribute to higher economic growth, an improved trade balance, enhanced fiscal revenue and job creation.
However, a recent study by the World Bank has warned that the ban may only prompt an increase in smelter investment from Chinese Nickel Pig Iron (NPI) producers in Indonesia in the short term, provided that the considerable energy requirements for a smelter are satisfied.