Indonesia delays nickel export restrictions

Indonesia — the world's largest nickel producer — will not prioritise a tax or ban on the export of low-grade nickel products such as nickel pig iron (NPI) in the near-term, according to Septian Hario Seto, a senior official in the co-ordinating ministry for maritime and investment affairs.

An export tax was first proposed by Indonesia last year, but its introduction has been hit by delays around regulation, alongside global inflationary pressures and economic slowdown that have depressed nickel demand over the past 12 months.

Speaking at the Indonesia International Nickel and Cobalt Industry Chain Summit held in Jakarta on 30-31 May, Seto said the government's decision was partly driven by the fact that both the low-grade NPI and wider nickel markets in Indonesia are currently in significant oversupply, with any export levy seen as a possible risk to the widening of this surplus.

"Most of the smelters are actually under the water at the moment and are facing commercial pressure," Seto said.

Seto further noted that current prices of coal — the main energy source for rotary kiln electric furnace lines that produce low-grade NPI — are problematic for producers and an export tax would only serve to exacerbate input cost and cash flow pressures.

Seto confirmed during the conference that authorities in the country are mainly focused on introducing a nickel price index "before the end of the year". A domestic price index has been prioritised to offset the conflict arising out of the way nickel ore and downstream nickel products are priced in Indonesia. While authorities use a formula linked to the three-month average of benchmark nickel prices on the London Metal Exchange to set ore prices, NPI prices for Indonesian trade are instead set in China.

"The priority for the government is the Indonesia nickel price index," Seto said. "If we calculate the export levy based on the assumed discount on NPI, the way NPI is priced at the moment, it will not be fair to the smelters."

Any export tax will be introduced only after the development of a price index, Seto confirmed.

By Raghav Jain