Indonesia is to immediately suspend nickel ore exports rather than stopping overseas shipments early next year, officials said yesterday, as the world’s top producer of the mineral looks to ramp up processing at home to increase its income.
About three dozen firms on Monday met government officials and agreed to stop exporting the metal, the Indonesian Investment Coordinating Board said.
London nickel prices briefly jumped to more than US$17,000 a tonne.
The surprise announcement came about a month after resource-rich Indonesia shocked markets by saying that it would roll out a planned nickel-ore export ban two years early.
Jakarta implemented an ore export ban in 2014 only to reverse course and relax it in 2017, when the government said that companies would have five years to prepare and start building homegrown smelters — which extract base metals from ore.
The government said that the decision was aimed at speeding up smelter construction in the country, which has almost one-quarter of all nickel reserves, valued at about US$350 billion.
“The meeting was held in order to take concrete action to speed up investment in the smelter sector,” the government said in a statement yesterday, as it confirmed the suspension.
Indonesia’s previously revised timeline, which would have seen the export ban ushered in early next year rather than in 2022, was criticized by some for cementing the country’s reputation for policy flip-flops.
Indonesian officials have said that they want to churn out higher-value mining products, rather than just shipping raw ore abroad — including to top importer China, which uses nickel to make stainless steel.
The move is also crucial for plans to turn the country into an electric-vehicle hub. Nickel is used in lithium batteries that power gas-free vehicles.
The Southeast Asian nation has been courting automakers to invest in electric-vehicle facilities, including Toyota Motor Corp and South Korea’s Hyundai Motor Co.
Some foreign firms are investing in nickel-battery processing plants in Indonesia, including China’s Tsingshan Holding Group Co (青山控股), while construction is under way on about two dozen domestic smelters, the Indonesian government said.
Separately, a global slowdown and a US-China trade dispute have created an environment in which “low interest rates for longer” is the new normal, Bank Indonesia Governor Perry Warjiyo said.
The trade dispute “isn’t helping anybody” and only serves as a reminder that “if you prolong the game of thrones, the kingdom will fall apart,” Warjiyo told a conference in Jakarta yesterday, referring to the fantasy TV series. “Many central banks have become more dovish. Lower interest rates for longer, this is the tagline we now know.”
While Southeast Asia’s biggest economy has been hovering at about a 5 percent growth level for several years, policymakers have become increasingly worried about spillover effects from the trade spat.
Bank Indonesia, which last week cut its key rate for a fourth consecutive month, expects the economy to grow 5.05 percent this year before accelerating toward 5.3 percent next year.
Additional reporting by Bloomberg
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