Downstreaming Without Redistribution

In recent years, the downstream mining policy has become a new mantra  for development, with the banning of nickel ore exports since January  2020 being an initial experiment. The deepening of the industrial  structure through the natural resource-based downstream that we have,  opens up opportunities for Indonesia to participate in global supply  chains, no longer as an exporter of raw materials but as an exporter of  high-value-added manufactured products.

Premature claims of the success of the downstream nickel policy based  on the export ban on nickel ore were made massively by many  government officials, including the President. This claim of success is  often glorified by the added value successfully created from the  downstream policy, which refers to the export value of a nickel. The  export value of nickel ore before the downstream policy in 2018 was only  in the range of US$ 3 billion, while now, in 2022, exports of downstream  nickel products will reach US$ 33.8 billion (507 trillion IDR). In 2023, it is  projected to exceed US$ 38 billion (570 trillion IDR). Based on the claimed  success of nickel downstream, the government will expand the  downstream policy to bauxite, tin, and copper in 2023 according to the  mandate of Law no. 3/2020 concerning Mineral and Coal Mining  (Minerba).

Downstream nickel with products in the form of matte nickel and  ferronickel has been carried out in Indonesia for a long time. However,  with nickel mining and processing carried out in an integrated manner  that is very capital intensive, only a few companies holding KK (Contract  of Work) can invest. After the issuance of Law no. 4/2009 concerning  Minerba, nickel mining by IUP (mining business permit) holders has  increased, triggering a drastic increase in nickel ore production and  exports, especially to China, which is generally processed into NPI (nickel  pig iron).

Following the mandate of the Minerba Law, which requires downstream  processing, a ban on nickel ore export was implemented in 2014. This  nickel ore export ban undermines IUP holders, who apparently cannot  afford to build smelters but simultaneously encourages the relocation of  many Chinese smelters to Indonesia to obtain raw materials. Nickel  processing by the relocated smelter is dominated by refining through  energy-intensive pyrometallurgical plants with semi-finished nickel in  the form of ferronickel, matte nickel, and NPI.