Downstreaming

Industry in Indonesia:
Nickel
Disclaimer: This study focuses on an in-depth exploration of
downstream processes within the nickel industry (and its
derivatives products such as Ferronickel, Nickel Matte, and
Mixed Hydroxide Precipitate (MHP)).
Contents Nickel 101

1. The process of nickel

2. Economics of nickel

3. Key stakeholders in nickel

4. Key regulations in nickel

5. Top issues in nickel

6. Recommendation

7. What’s next?
Get to know Nickel

Nickel is a shiny metallic element with a silvery-white appearance. It's the fifth-most abundant
element on Earth and is widely found in both the crust and core. It's also a common component in
meteorites, often found alongside iron. Nickel is present in soil and water naturally and plays a crucial
role as an essential nutrient for plants.

Why people use nickel?

High melting Resists corrosion and Magnetic at room

Highly ductile Alloys readily Has catalytic properties Recyclable
point ( 1453°C) oxidation temperature

Nickel's high Resistance to Nickel is very Nickel is easily This allows Nickle to be Nickel's catalytic role is vital in Nickel can be
melting point corrosion making it capable of being combines with attracted to magnets industry, as it accelerates collected,
makes it ideal for ideal for tough stretched or other metals or and become a magnet reactions without processed, and
high-temperature environments like drawn into thin elements to create itself when near a undergoing permanent reused to create
applications, marine wires or threads new materials with magnetic field. This is changes. This efficiency could new products or
including applications and without breaking. enhanced valuable in making reduces costs and minimizes materials.
aerospace and electroplating This property properties, such as strong permanent energy consumption in
automotive engine (depositing one makes it useful for increasing magnets used in industrial processes, making
production. metal over various resistance to electric motors, it an invaluable asset.
another), ensures applications where corrosion or generators, and medical
durability and flexibility and the improving strength devices like MRI
long-lasting ability to form machines.
functionality. intricate shapes are
needed.
The current trend of Nickel usage

First-use of Nickel - as intermediate goods End-use of Nickel - spread around multiple sectors

The initial application of nickel involves transforming nickel products Nickel finds its end use in a diverse array of sectors due to its
into intermediate goods, serving as the foundation for end-use exceptional physical and mechanical properties.
products containing nickel. In nearly all instances, these initial products
undergo additional processing before becoming usable.

2021 2021
The future of nickel demand is batteries

Although stainless steel will remain the primary initial use for nickel, the key driver of demand growth in the upcoming two decades
will be batteries. Starting from just 6% of the global market share in 2021, the adoption of batteries is expected to rise significantly,
making up 36% of nickel consumption by 2040. This shift is anticipated to increase the nickel demand to over 3 million tonnes from 80
thousand tonnes in 2020.

6x increase in battery
shares of nickel
consumption

Source: IEA
 Bibliography
Type of Ore
Saprolite (Part of Laterite Nickel)
● Nickel content: >1.6%
● Processing: Drying, Calcination, Smelting
(pyrometallurgy)
● End-product: FeNi/NPI/Ni-matte
Limonite (Part of Laterite Nickel)
● Nickel content: <1.6%
● Processing: Leaching, Refining (hydrometallurgy)
● End-product: Nickel, Cobalt
Sulphide
● Nickel content: ~1-2%
● Processing: Leaching, Refining
● End-product: Nickel, Copper, Platinum-Group Metals
Type of Processing
Pyrometallurgy
● Heat-based extraction and purification process, generated
86.9 kg CO2-eq/kWh carbon emission.
● Form: Alloy
● Process: Drying, Calcination (elimination of remaining
water & crystal), Smelting, Refining (elimination of
unwanted elements)
● Tech example: Rotary Kiln-Electric Furnace (RKEF), Blast
Furnace (BF)
Hydrometallurgy
● Use Chemical reactions in a liquid medium to extract
metals, generated 60.8 kg CO2-eq/kWh carbon emission.
● Form: Powder
● Process: Leaching, Solution-based concentration and
purification, Metal recovery
● Tech Example: High Pressure Acid Leach (HPAL)
Nickel Class
1st Class Nickel
● High-purity nickel typically containing over 99%
nickel.
● Suitable for manufacturing high-quality stainless
steel and other specialty alloys.
● Often used in the aerospace, electronics, and
chemical industries.
2nd Class Nickel
● Nickel with lower purity, typically containing less
than 99% nickel.
● Used in less demanding applications, such as the
production of lower-grade stainless steel and some
alloys.
● Generally less expensive than first-class nickel.

Context in Indonesia Nickel-to-Battery in Indonesia

Laterite deposit layers (illustration)

● Because of its geographical location, Indonesia possesses laterite nickel but not ● To be able to produce batteries, nickel limonite
sulfide. It boasts the world's highest reserves of laterite nickel at 18.7%, needs to be processed using a
equivalent to approximately 33.29 million tons. hydrometallurgical process. However, currently
nickel limonite processing in Indonesia is not
● The prevailing and proven processing method in use is Pyrometallurgy, optimal due to technological constraints.
especially RKEF. In Indonesia, 33 registered companies use or will use the
Pyrometallurgy process, while only 9 companies are registered for ● While Indonesia already produces some mixed
Hydrometallurgy. hydroxide precipitate (MHP) for batteries, it's not
yet at significant levels, and both the pure
● Present demand and technological constraints in nickel processing are nickel product and battery industries are still
compelling Indonesia to primarily concentrate on second-class nickel for under development.
stainless steel production.
Process Overview process
Remarks:
Available in Not Available/ Under
Indonesia Processed Outside development

RKEF/BF
Stainless Steel Stainless Steel
Nickel Pig Iron [NPI] Stainless Steel Stainless Steel
Hot Rolled Coil Cold Rolled Railways
(4-15% Ni) Slab Welded Pipe
[HRC] Coil [CRC]
Saprolite Electronic
ores Stainless Steel Casing
Seamless Pipe Oil & Gas
Ferronickel [FeNi] Stainless Steel Stainless Steel Trans
(16-30% Ni) Billet Rod/Bar
Stainless Steel
Bolt & Nut Defense
2nd Class Nickel

Building
Research still conducted in
Converter Indonesia
Nickel Based Household
Alloy
Sulphide Pure Nickel
Nickel Matte (40-75% Ni) Automotive
ores (99.9% Ni)
Plating
Autoclave &
solvent extraction Add sulphate Health Tools
HPAL
Ship

Mix Hydroxide Precipitate

Batteries Agriculture
Limonite
Nickel Sulphate Precursor Batteries
ores
(NCA, NMC) Construction
Mix Sulphide Precipitate 1st Class Nickel

Ore Smelting/Processing Forming/Refining Finished Good Application

 Battery & Nickel Indonesia’s Nickel-to-Battery Plan

Understanding Battery in EV Nickel as Component of Battery Battery Basics

Nickel Ore

The battery in electric vehicles (EVs),

Nickel is an essential component in
currently the most commonly used is Under development but still limited realization
cathodes. It enables batteries to
Lithium-Ion or Li-ion battery, is a
provide higher energy density and
unique type of rechargeable battery Nickel & Cobalt
greater storage capacity at a lower cost.
also used in devices like phones and Sulphate
In the context of EVs, this means

IBC Development Plan

laptops. It operates by moving tiny
longer driving ranges at a lower
particles called lithium ions back and
production cost (compared to
forth to store and release power, thus
previously using cobalt in cathode). Under development, no realization yet
powering these devices.
Nickel is the main
component for cathode in Batteries Precursor
most types of batteries.
Threat: Battery without Nickel Nickel Composition in Li-On Battery

The increasing use of nickel-free LFP
(Lithium Iron Phosphate) batteries in
EVs may pose a future challenge to
nickel sales projections. While NMC
remains the dominant choice,
stakeholders should monitor this
evolving landscape for potential shifts
in nickel demand within battery
production.
Two commonly used Li-ion battery Cathode
chemistries are NCA
(Nickel-Cobalt-Aluminum) and NMC
(Nickel-Manganese-Cobalt). NCA
Source: DRS University of Illinois Urbana-Champaign
contains a higher proportion of nickel Battery Cell & Pack,
(80-90%) in its total composition ESS, Charging Station
compared to NMC (20-33%). NMC is
widely used in many electric vehicle
models currently available.
Battery Recycle

Context in Indonesia

● Indonesia has not yet mastered the technology for processing and refining nickel ore, limiting its ability to produce high-purity nickel needed for
batteries.
● Investment has primarily focused on constructing pyrometallurgical facilities for NPI production, while the development of hydrometallurgy for nickel 25% 25%
battery materials remains limited.
● Indonesia is currently working on converting second-class nickel (NPI/FeNi) into first-class nickel (matte nickel) using converters. However, this process
raises concerns about cost efficiency, high emissions, and less attractive pricing, typically only 70-80% of the nickel price on the London Metal
Exchange (LME). 25%
25%
● To boost Indonesia's battery industry, the government created the state-owned Indonesia Battery Corporation (IBC), which plans to integrate the entire
battery value chain, from raw materials to manufacturing and supporting EV infrastructure.
Contents Nickel 101

1. The process of nickel

2. Economics of nickel

3. Key stakeholders in nickel

4. Key regulations in nickel

5. Top issues in nickel

6. Recommendation

7. What’s next?
Indonesia has the largest Nickel reserves in the world. Way passed the other countries.
Making Indonesia is ‘the spot’ for world’s nickel supply chain

World total reserve: >95 million tonnes Ni Indonesia still have an unexplored
Where in Indonesia?
(million MT) resources

Our reserve
will last for the
Others next 15-20
years depends
on production

The majority of nickel reserves, about 90%, are located in

Central Sulawesi, South Sulawesi, Southeast Sulawesi, and
North Maluku.

Nickel smelting facilities and capacities (2022) Smelting companies

~92 ~8.3
12 million million
25

Smelter facilities Total input capacity Total output Planned smelter

HPAL: 2 (tonnes, annual) - capacity (Tonnes, facilities in
RKEF: 10 registered annual) - registered 2023-24
Nickel market size
Products of nickel that produced in Indonesia 2022 Market Size – Nickel Pig Iron, Ferronickel, Nickel Matte

FeNi and NPI Iron Steel Nickel Matte MHP Total

$13B pa $14.3B pa $3.7B pa $2.1B pa $33.8B pa

NPI/ FeNi Iron and Nickel Matte MHP
(80-90% Ni) Steel (70 - 80% Ni) (25 - 34% NI)
This is Mandala estimates based on export data from Ministry of Energy and Coordinating Ministry of Maritime and
Investment and price from world reference price for each products in 2022
USD 18K - USD 17 - USD 20K - USD 10.3K
25K 25K 28K - 11K

Indonesian Nickel: Economic Value, Producers, and Export Destinations

Top 2 Producer for each products
Nickel export value 2018 - 2022 (million USD) Top 5 export destination countries
(based on capacities), ton per year
Ore nickel banned
Nickel Pig Iron Nickel Matte enacted

600K
80K

600K
43.6K

%
: 29
GR
CA
Ferronickel MHP

1.2 million
246K

1 million
Government argues that smelter development is not only beneficial
to the national economy but more importantly to increase regional development
Higher regional economic Downstream has boost Eastern Indonesia economy
growth and GDP per capita since nickel (2022)
FDI share outside Java continues to increase

Central Sulawesi Economic Growth (%)

(Central Sulawesi)
Morowali
73%
vs. 2010: 8%

North Maluku Economic Growth (%)

Central Halmahera
Added value in the downstream industry

(North Maluku)
60%

vs. 2010: 3%

Fee, taxes, and

Labor
retributions

Source: Indonesia Central Bureau Statistics

Indonesia leads in nickel ore production,
China dominates in both the downstream industry and leads in battery production
Import of Nickel Ore Lithium-ion battery manufacturing
Comparative Study Rationale MHP Production (Tonnes)
(USD Millions) capacity (GWh)
Source: OEC Source: Statista Source: S&P Global

Country Import Country Production Country Production

Leading in the Has a strong EV Has largest
downstreaming and industry and came in reserves similar to 2,360 720K 2,051
battery production second place in Indonesia
manufacturing battery

403 200K 187.3

Great producer, and A strong producer of 314 150K 41.6

also has strong the end-product for
downstream industry EV battery
97.8 50K 25.5
Reserves of Nickel Ore (MT)
Source: USGS
Share of Total 0.922 30K 10
Country Reserve
Reserve

21 mio 22% 0.126 10K N/A

21 mio
Australia has limonite 22% Upstream Downstream (battery)
and sulphide

2.8 mio 3%

2 mio 2%

340K 0.3%

- -
Contents Nickel 101

1. The process of nickel

2. Economics of nickel

3. Key stakeholders in nickel

4. Key regulations in nickel

5. Top issues in nickel

6. Recommendation

7. What’s next?
"Indonesia possesses abundant natural resources, one of
which is nickel. Its vast and biodiverse land, among the richest
in the world, can undoubtedly be a significant strength for
Indonesia if managed wisely and sustainably.

There is one condition: these resources must be processed

and industrialized domestically to maximize their value for
national interests.

Downstream processing and industrialization of natural

resources must continue.

For instance, nickel downstreaming has increased iron and

steel exports 18-fold. In 2014, it was only around IDR 16 trillion,
but in 2021, it increased to IDR 306 trillion. By the end of 2022,
we hope to reach IDR 440 trillion, solely from nickel.

Following nickel, we will also push for the downstreaming of

bauxite, copper, and tin. We must build an integrated
domestic industrial ecosystem that will support the
development of the world's green economy."

Ir. H. Joko Widodo

President of Indonesia
Supporters of the development of the nickel downstream industry with arguments to help the country's economy vs. the
opponent which argue Indonesia get the least benefit from nickel downstream industry

FOR AGAINST

Utilization of Non-optimum
Minister of Finance - Neutral
limited Faisal Basri - Economist benefit for
Association of Indonesian Nickel Miner ● The export duties have decreased Indonesia
resources now ● Downstreaming feels like
● Indonesia needs to develop its nickel due to downstreaming (not
upstream due to little value
● To maintain the availability of reserves and government’s priority)
Minister of Investment addition
optimize limonite, it is necessary to limit the ● There are additional revenues from
“The sky may fall, but downstream will ● Benefited China more than
allowed nickel ore content for sale to a non-tax state revenue (PNBP) and
still be the country's priority. Then, the benefited Indonesia
maximum of 1.6 percent. royalties
● Banish illegal mining export ban will still be maintained. If
you want to (challenge) it at the WTO Non-optimum
(World Trade Organization), then go to DPR member (Rofik Hananto, PKS)
benefit for
Added value the WTO.” ● Run by Chinese companies Indonesia
Association of Young Indonesian ● Cheap price without export tax
Entrepreneurs (HIPMI) ● Foreigners bought cheap nickel
The downstream policy has been products, Indonesia bear the
implemented successfully, especially in the Minister of Industry environmental costs
mineral sector. This policy has managed to Support downstreaming
increase investments and the added value industrialization through a human
of mineral processing exports development perspective DPR member (Mulyanto, PKS)
● The current downstreaming is
detrimental to the country and
threatens natural resources.
Minister of Energy ● What can be exported should be Non-optimum
Without domestic industrialization, the country will above 80% benefit for
DPR members always depend on the import of raw materials, Indonesia
(Bambang DH - PDIP) making it highly vulnerable and susceptible to
Support downstreaming non-technical factors such as fluctuations in the Environmental
- only needs some exchange rate of the rupiah
optimization in the WALHI
process Nickel mining and downstream
Minister of Trade industry causes increased deforestation
We will staunchly defend nickel and water pollution
processing to promote Indonesia
Utilization of
as a center for the electric vehicle Business
industry negligence
limited
DPR members resources now JATAM (Jaringan Advokasi Tambang)
(Ramson Siagian - Questioning the fact that 6 mining
Coordinating Minister for Maritime and
Gerindra) companies run the business without
Investment
Support building Ministry of IPPKH.
● Industrialization is important so that
smelter because we Indonesia doesn't only become a raw Environments -
have limited resources material exporter. Neutral
People of Obi Island Environmental
● Contributing to higher regional economic Not saying support
growth nickel mining in The nickel industry in Sulawesi is
● More quality investment and encourages general, but actively causing them to be evicted, losing their
industrialization in Eastern Part of banish illegal mining livelihoods, and making the springs
Indonesia muddy 17
Is it true that the majority of the Indonesian smelting industry is run by Chinese companies?

Who owns the smelter? (Nickel

Who owns the smelter? Who owns the smelter? (Nickel Matte, capacity)
(Ferronickel, capacity) Pig Iron, capacity)

40% China: Xinxing

60% Indonesia

59% China
40% Indonesia
100% China

100% China
100% China
Dai Guoang Who owns the smelter? (MHP,
capacity)
100% China

There has been a new development of smelter that fully

owned by all Indonesian investment, such as: PT Ceria
Nugraha Indotama (CERIA)

Obsidian, Virtue Dragon, and Indonesia Guang (who Part of National Strategic Project that is planned to start
has 100% Chinese shere) hold a IUI permit operate in 2024.

It will be one of the big plant for Mixed Hydroxide 100% Indonesia 36.9% China
Ownership Precipitate (MHP) with 100,000 tons capacity 63% Indonesia
Contents Nickel 101

1. The process of nickel

2. Economics of nickel

3. Key stakeholders in nickel

4. Key regulations in nickel

5. Top issues in nickel

6. Recommendation

7. What’s next?
Nickel mining and smelting falls under 3 government agencies:
Industry, Energy and Mineral, and Governors
Type of Permits Explanations Gov Agency

Ministry of Energy and Mineral: Exploration cover

IUP Eksplorasi: Izin Usaha
It is a specific license given to mining companies to conduct exploration, feasibility study, and multi provinces
Pertambangan Eksplorasi / Mining
investigation.
Business License for exploration.
Governor: Exploration is in the same province

Ministry of Energy and Mineral: Mining and

IUP OP: Izin Usaha Pertambangan It is a business license given to businesses or entities to perform mining activities. In addition, the smelting cross multi provinces
Operasi Produksi / Business Operation latest government regulation also required companies who are IUP OP holder to also have value
Production Mining License added activities, i.e., smelting. Governor: Smelting and mining are in the same
province

IUP OPK Smelting: Izin Usaha Ministry of Energy and Mineral: Smelting and
Pertambangan Khusus Operasi mining area in different province or the mineral
It is a specific license given to companies that have smelting operations integrated into mining
Produksi Khusus untuk Pengolahan are coming from overseas
activities either through their own mining site or others that have mining license. This license
dan/atau Pemurnian / Business Special
gives the right to buy, sell, transport, process, and smelt mineral commodities
Production Operation Mining License Governor: Smelting and mining are in the same
for processing or smelting province

IUP OPK Transport: Izin Usaha

Ministry of Energy and Mineral: Transport and
Pertambangan Khusus Operasi
selling cross multi provinces & overseas
Produksi Khusus untuk Pengangkutan
It is a specific license given to companies to buy, transport, and sell mineral commodities
dan Penjualan / Special Production
Governor: Transport and selling are in the same
Operation Mining License for transport
province
and selling

It is a business license given to businesses that do their activities in processing materials into
IUI: Izin Usaha Industry / Business
value added products. In nickel case, this license referring to smelting activities without having Ministry of Industry
Industry License
mining site.
The permit process is heavily regulated to ensure national interest is well protected

Disclaimer: This analysis only cover mineral logam or metal

minerals

Mining area / Wilayah

pertambangan (WP)
Discussion, Proposal, and
Approval of potential ming
area by government bodies Approved by Minister

Draft Business Auction of Business License Mining Area

ion
te
r dat License Mining Area
i nis m
en ● Winner of auction receives permit of
y M recom ● Document name: Wilayah Usaha Izin business mining area (WIUP)
db r Pertambangan (WIUP) ● Prioritized for SOEs & IUP holder with
ve erno dy
pro v u ● Drafted by Directorate General different commodities but in the new
go st
Ap n lity ● Contents: technical, economics, land area
d o bi
se asi size, boundaries, price estimation, ● Auction criteria: experience, human
Ba d fe
an usage of lands, and governor capital capability, and business plan
recommendations (RKAB)
Business Mining area Determined /
Wilayah Pertambangan (WUP)

Sales & Smelting & Processing Mining Operations and Production Exploration of mining area
direct
Distribution IUI holders
direct
Transportation direct
Smelter
companies companies

License name: IUP ● License name: IUP OPK ● License name: IUP OP ● License name: IUP Eksplorasi
OPK Pengangkutan Pengolahan dan Pemurnian ● Majority of equity must be owned ● Exploration period 8 years
dan Penjualan ● Only allow to smelt from entities by local entity (51%)
that have IUP ● Not allow to export unless the ores
● Domestic need is prioritized mined are smelted domestically
Nickel regulation timeline
2009
Law (UU) No. 4/2009
This law allowed more foreign investment in Indonesian mining but
required all processing to occur within the country for the next
five years.
Fundamental
Number of Smelters (Nickel): N/A (0)
2019-2020
EU sued Indonesia to WTO. They challenged both Indonesia’s
nickel ore export ban and the requirement that all nickel ore
processing take place onshore.
Number of Smelters (Nickel): 17 (9)
2020
Energy & Mineral (ESDM) Ministerial Regulation No. 11/2019
The Nickel Ore export ban took effect in January 2020, two years
ahead of schedule.
2nd export ban
Number of Smelters (Nickel): 17 (9)
2012
Energy & Mineral (ESDM) Ministerial Regulation No. 7/2012
Substantial taxes on commodity exports began, with an initial ban
on mineral ore exports that was later withdrawn and rescheduled
foreign ownership limits, and longer licenses, resulting in
for 2014.
Number of Smelters (Nickel): N/A (0)
2017
Trade Ministerial Regulation No. 1/2017
Nickel ore and bauxite export bans were lifted with certain
conditions, originally planned to be in effect for five years. There is
also an issue because Indonesia does not have adequate processing
facilities.
Number of Smelters (Nickel): 14 (7)
2022
Indonesia lost on its case in WTO. Then filing for appeal to WTO
Appeal Body
Number of Smelters (Nickel): 20 (12)
2012-2014
The main issue that caused the withdrawn was the
absence of processing facilities. To address this, the
government enticed foreign investment in new
smelters through incentives like tax breaks, relaxed
substantial investments, especially from China.
Number of Smelters (Nickel): 6 (0)
2014
Government Regulation (PP) No. 1/2014
Export ban enforced. Obligating the nickel mining
company to refine the product domestically.
1st export ban
Number of Smelters (Nickel): 6 (0)
2024-2025 (expected)
Indonesia’s appeal processed
Number of Smelters (Nickel): 53* (26*)
*) 33 on process in 2022, 14 for Nickel
(1/3) The nickel industry is heavily regulated. From upstream to downstream, it is already regulated to ensure the growth of nickel
mining and downstream industries

National
Description
Regulation

Law No. 4/2009

● Central Government: Determination of Mining Area, mining license for inter-provincial and/or
Clause 6,7,8 (as
Division of ocean area above 12 miles from coastline, mining license for special mining license, monitoring and
revised by Law
Role supervision to regional government
No.3/2020)

Law No. 4/2009 ● Three kinds of mining area: mining business area, people’s mining area, state backup area
Clause 9 to 33 (as ● Central government decides on mining area after consultation with regional government and
revised by Law people’s assembly
No.3/2020) ● People’s mining area limited to depth at most 25 meter, maximum area 25 hectare, has been a
Mining Area people’s mining site for at least 15 years

Government Regulates about studying potential mining area, mechanism to determine mining area, criteria for
Regulation (GR) No. mining area, evaluation of mining area
25/2023

License Metallic Minerals

Exploration Production Operation

Mining
Law No. 4/2009
Business
Clause 36 to 66 (as
License Time (years) 8 (+1) 20 (+10+10)
revised by Law
No.3/2020)
Area Size (thousand ha) 5-100 Maximum 25

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(2/3) The nickel industry is heavily regulated. From upstream to downstream, it is already regulated to ensure the growth of nickel
mining and downstream industries

National
Description
Regulation
Mining Law No. 4/2009
Business Clause 36 to 66 (as ● Metallic mineral mining integrated with processing and/or refining facility will be licensed for 30
License revised by Law years and guaranteed extension for 10 years for each extension
(Cont.) No.3/2020)

● Special mining business license only for metallic minerals and coals. Priority for special mining
Law No. 4/2009 (as business license area is given to SoE (central and regional), where for private they need to go
Special revised by Law through bidding process
Mining No.3/2020) Clause ● Maximum time and area for exploration are 8 years and 100 thousand hectare for metallic mineral
Business 74-89 ● Area for operation production is determined by Minister of Energy and MR. Maximum time for
License operation and production are 20 years (with possibility of 10-year extension twice) for metallic
mineral and 30 years (with possibility of 10-year extension) for mining site with integrated
refinement facilities

Law No. 4/2009 (as ● Mining and special mining business license owner is obligated to use mining road for their
revised by Law business activity. If not available, license owners can use public infrastructure after meeting
No.3/2020) Clause requirements by regulation
90-112 ● License owners are obligated to return area after post-mining reclamation (emphasis through
revision). License owners also have to put deposit fund for reclamation
● License owners are obligated to do processing/refinement (metallic minerals only) and to pass
Rights and
a minimum requirement
Obligations
● License owners have to formulate development and empowerment program for local people and
allocate fund for the program as set by the Ministry of EMR
● Operation production license owners owned by foreign entity must divest 51% of its share to central
government, regional government, central/regional SoE, and when not done, to national private
entity.
● Operation production License owners must allocate fund for mineral and coal resilience reserves
aimed to find new reserves

This slide contains confidential information. Unauthorized sharing is strictly prohibited. 24

(3/3) The nickel industry is heavily regulated. From upstream to downstream, it is already regulated to ensure the growth of nickel
mining and downstream industries

National
Description
Regulation

Temporary Law No. 4/2009 (as ● Temporary suspension can be given to license owners (force majeure, environmental capacity) by
Suspension revised by Law the Ministry of EMR. Suspension can be given for 1 or 2 years depending on the reason.
No.3/2020) Clause ● Termination of mining activity can happen due to expiration of license, license revocation, or
and
113-123a license returned. Mining area can be offered to SoE, private entity, cooperative, or individuals.
Termination
● Before returning their license, license owners have to do reclamation and post-mining activities to
of Mining
a success rate of 100%
Activity

Law No. 4/2009 (as ● Mining business license owner must use local/national mining service firms
Mining revised by Law
Services No.3/2020) Clause
124-127

Law No. 4/2009 (as ● Mining business license owners must pay government income, which includes tax and non-tax
revised by Law income
No.3/2020) Clause ● Rate for tax income is set on separate government regulation. Non-tax income includes fixed fee,
Government
124-127 production fee, data information compensation, and other legal non-tax income
Income
● Special mining business license owner is obligated to pay 4% to central government and 6% to
regional government from net profit since production

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Export policy in Indonesia
Laws Regulating Nickel
Law No. 4/2009 on Minerals and Coal Mining
Government’s Regulation (GR) No. 96/2021 on Minerals and
Coal Mining Business Practice
GR No. 55/2010 on Minerals and Coal Mining Management,
Monitoring, and Governance
GR No. 78/2010 on Reclamation and Post-Mining
GR No. 26/2022 on Type and Rate for Non-Tax Government
Revenue applied to Ministry of Energy and Mineral Resources
KEY REGULATION
Energy and Mineral Resources Ministry Regulation (MR) No.
8/2018 on Minerals and Coal Mining Business (last revised by MR
No. 17/2020)
Requirement to get Recommendation for Exporting Nickel Ore
To export nickel ore with purity under 1.7%, license owner need to obtain
recommendation from Directorate General of Minerals and Coals, which can be
given only:
● By verification of physical progress in planning and construction of
refinement facility as planned
● Only independent verifiers appointed by the government can verify
progress with specified method and criteria as specified by Appendix
VI-IX in MR 8/2018
Key Highlights
Highest legal basis for minerals and coal mining, including Nickel. The scope of law
includes mining area, types of mining business, mining licensing and its
requirement, suspension and termination of mining activity, government income
● Minerals and Coals export are allowed only after meeting the minimum
requirement in processing/refinement and after supplying domestic demand
(GR 96/2021 clause 158(2))
● Operation/Production License Owner is obligated to do processing/refinement to
enhance value added. Minimum requirement will be set by Ministry Regulation.
(GR 96/2021 clause 167, 169)
● Businesses that has conducted processing/refinement can get incentives such as
export facility and/or fiscal/non-fiscal incentives (GR 96/2021 clause 168)
● Export for nickel with content below 1.7% is limited by a deadline and can only
be done if license owner has or in the process of building refinement facility and
pay exit duty (MR 8/2018 clause 46)
● Appendix to MR 8/2018 specifies the minimum requirement for refining, with
different requirements based on type of nickel (Saprolite, Limonite, etc), and the
resulting product
Nickel Ore Export Moving Deadline
MR 8/2018 MR 11/2019
Recommendation to do export for Recommendation to do export for
nickel ore with purity under 1.7% can nickel ore with purity under 1.7% can
be given by the Directorate General be given by the Directorate General
of Minerals and Coals by at most of Minerals and Coals until the
January 11 2022 expiry date of the recommendation
or by at most December 31 2019
Indonesia's policy to ban nickel exports has sparked strong opposition from the EU.
2019-2021
22 November 2019
The European Union (EU)
requested to consult with
Indonesia regarding nickel,
such as restriction of exports,
requirement for domestic
processing and marketing,
etc
April 2021
The Director-General of
World Trade Organization
(WTO) composed panel at
the request of EU
November 2021
Chair of the panel informed
the Dispute Settlement
Board (DSB) of WTO that the
final report on the topic was
estimated to be issued in the
last quarter of 2022
2022
Arguments by European Union
Arguments by Indonesia
That the measures by Indonesia are inconsistent with ● The export ban and the domestic processing
Article XI:1 of General Agreement of Tariffs and Trade (GATT): requirement (DPR) were exempt from the obligation in
Article XI:1 as they were export restrictions temporarily
“No prohibitions or restrictions other than duties, taxes, applied to prevent an imminent critical shortage of a
or other charges, whether made effective through quotas, product essential to Indonesia (Article XI: 2(a))
import, or export licenses or other measures, shall be ● EU had failed to establish a prima facie case that the
instituted or maintained by any contracting party … or sale DPR was inconsistent with Article XI: 1 of the GATT 1994
for export of any product destined for the territory of any ● The measures taken were justified under article XX(d) of
other contracting party.” the GATT 1994
On 30 November 2022, the panel report was circulated to WTO 8 December 2022
members. The Panel found: Indonesia notified the DSB of its
1. The DPR fell within the scope of the obligation in Article XI:1 decision to appeal to the
as by its nature restricted the sale for export of nickel ore Appellate Body (a
2. Indonesia had not demonstrated through evidence non-operational body)
pertaining to employment and revenue in the relevant
industries July 2023
3. Duration of export ban and DPR had not been temporarily EU is currently doing consultation
applied on possible regulation
enforcement/ counter measures
Other than industrialization benefits to the economics, the government also leverages
downstreaming of nickel to add more state income through taxation scheme.
State Revenue: Tax and Non Tax
Non-Tax State Revenue / Royalties (PNBP)
Non-Tax State Revenue / Royalties PNBP Regulation
● Ore Nickel 10% from selling price (SP) per ton (regulated
based on Government Reference Price or Harga Acuan
Mineral (HAM)
● Ore Nickel with Ni <1.5% set at 2% from SP (EV batteries)
Ores
● Nickel pig iron (NPI) 10% from SP per ton
● Other types of smelted nickel 2% from SP per ton
● Nickel Metals 1.5% from SP per ton
Refined
● Windfall profit is when a company receives extra profit
due to sudden spike of price in the industry
● PNPB only applicable to Nickel Matte and only if the
price of Nickel Matte exceed USD 21k per ton
Windfall
Profit
Value Added Tax / PPN Income Tax / PPh
Significant increase in tax collection claimed by the government
Nickel PNBP for 2022 is US$784 million & 96% increment from
2021 (Ministry of Energy & Mineral Resources) vs. US$49 million in
2016 (period before ores export is banned, Mandala Estimation) :
● Adjustment of HAM or Mineral Reference Price that
reflect market price from $17k per ton to $25k per ton
(e.g PNBP semester 1 2022 improved significantly due to
the correction of HMA)
● The ramping up of smelting site construction are
mostly completed in 2021
Nickel Tax collection for 2022 is US$1.13 billion vs US$104 million
in 2016 (period before ores export is banned) (according to
Coordinating Ministry of Investment and Maritime)
● Income tax for 2022 is $22 million
● Smelters that received income tax holiday for the last
7 years are starting to pay. While there are still 2
companies that received 20 years tax holiday
Contents Nickel 101

1. The process of nickel

2. Economics of nickel

3. Key stakeholders in nickel

4. Key regulations in nickel

5. Top issues in nickel

6. Recommendation

7. What’s next?
Problem Tree of downstreaming industry in Indonesia. Case: Nickel

The debate over economics,

environment, and geopolitics
tension

Environment
Economics Geopolitical tension
The environmental threat of mining nickel and
Where does the money goes? The West vs. China
downstreaming

1. We have an increased PNBP, export, and

regional GDP
1. How bad is the environmental impact on nickel
2. Where does it go?
mining?
3. Is poverty decreasing in area where nickel 1. US avoid investing in Indonesia
2. The cost of CO2 emission, deforestation
mining exist? 2. EU’s rage on nickel ore ban
3. The loss of income from fishermen and eco
4. Do we need to mine the nickel now since
service
we don’t know when the battery trend will
end?

“Who gets the most money from Nickel “It’s not that we support China and
“We used to get IDR 1 mio fish in one
Smelter? Of course it goes all to China, anti-America. It’s just that when we ask
catch, now, we are lucky if we get 300K,
we get zero.” for help regarding our downstream
and it’s much farther than before, so the
- Faisal Basri, Economist policy, China answer the call. And that’s
cost is increasing.”
what we need now.”
- Pak Ito, Fishermen in Bahodopi,
- Arsjad Rasjid, KADIN
Central Sulawesi
The nickel boom increased revenue and …but poverty rates in the nickel-producing regions tend to increase, and there
regional growth in mining areas but has been are mixed results in terms of access to higher-quality jobs.
slow to benefit local communities.
Poverty Rate:
Additionally, there is an opportunity cost tied
to relaxed smelting industry shareholder rules. The poverty rate in Central
Sulawesi and North Maluku has
been rising even with recent
economic growth in these regions,
Indonesia’s economy to hit the jackpot with nickel… suggesting a limited trickle-down
effect on poverty reduction. In the
last two years, the poverty rates in
Central Sulawesi and North Maluku
Non-tax Revenue / PNBP: appear to contradict the
PNBP from Nickel in 2022 achieved $784 million. Mandala
15x estimate that this value is increased by 15x compared to 2016
decreasing trend observed
nationally.
(before ore exports banned) at US$49 million.

Mixed results in job quality:

Export Value: A growing industry should have

The export value skyrocketed from US$ 6.5 billion in 2016 to an
5x impressive US$ 33.8 billion in 2022, representing a remarkable
provided local workers with
access to higher-quality formal
29.13% CAGR. jobs. As the economy develops, the
shift from the informal to the
formal sector should have been
Regional Economic Growth: more pronounced. This transition is
In 2022, the epicenter of nickel mining, Central Sulawesi, and visible in North Maluku but not in
3-4x North Maluku, witnessed growth rates 3-4 times faster than Central Sulawesi.
the national economic growth.
Based on research by the MEMR,
the downstreaming adds 7x to job
absorption

Economic Growth (%)
Central Sulawesi, North Maluku, and
Indonesia (2011-2022)
Central Sulawesi and North Maluku have
consistently outpaced the national
economic growth rate, with both regions
accelerating their growth after 2016,
resulting in a significant divergence from
the national growth rate.
Easing regulations on foreign ownership may limit the country to only capture
25-27% of potential direct monetary gain in nickel-processing industry.
Est. direct monetary gain from Relaxed regulations for foreign investors in the
nickel-processing industry Indonesia
nickel-processing sector might cause Indonesia
(FeNi/NPI, Nickel Matte, MHP) Shareholder to miss out on significant short-term direct
25-27% + tax & non-tax monetary gain. Given Indonesia's free foreign
revenue + wage for
US$ 12.9 - 29.7 ID workers
exchange regime, monetary gain generated in
the industry can be easily moved out. Our
Bn / year Foreign estimates suggest that the potential direct
73-75% Shareholder monetary gain in the nickel-processing industry
ranges from US$ 12.9 billion at current utilization
Mandala Estimate: Assuming all facilities are fully operational and only
considering the direct monetary gain from nickel processing operations.
rate to US$29.7 billion at full utilization.
Riding the wave: NMC vs LFP batteries. If LFP leads the future of battery, it could reduce expected nickel
demand from battery industry

LFP batteries have a lower cost but also a lower energy density, leading to a By 2040, an even LFP-NMC split could push nickel demand to 3M tons; LFP
cheaper product with less driving range dominance would cut this by 35%

NMC LFP Current forecasts largely assume a near-even split between LFP (49%) and NMC (46%)
batteries for nickel demand.

Material Lithium, Nickel, Lithium, Iron,

Estimated Nickel Demand from Batteries (tonnes)
Composition Manganese, Cobalt Phosphate

Avg. Cost $130/kWh $90/kWh

Energy Density 200 Wh/kg 160 Wh/kg

Discharge Cycles 1,000 2,500 35%

Until 80% capacity

LFP: Lower cost, lower density (lower range), higher discharge cycles (more durable)
NMC: Higher cost, higher density, lower discharge cycles

In 2020, Tesla could reduce its Model

3 price from ¥300k to ¥250k (-16%)
by utilizing LFP which aligns with
local government subsidies.

Cons:
Pros:
● Lower energy density (33% larger
● Abundant supply of raw materials, Source: Mandala Estimation, IEA, Financial Times
battery for same driving range)
more scalable in the long-term
● Restricted charging capabilities in
● Approx. 43% cheaper than NMC
cold weather. Yet, if LFP emerges as a superior (at ~70% market share), it could reduce 2040's projected
Still a viable option in moderate climate nickel demand by approximately 35%.
such as Southeast Asia
All the PNBP, export numbers, and GDP do not account for the environmental costs of nickel mining.
Experts say that due to Indonesia's numerous RKEF facilities, it contributes to the highest emissions in the
nickel product pipeline, thus making Indonesia the 'dirty kitchen' of China

Indonesia has become the "dirty kitchen" for

But they don’t really count the environmental aspect. Waste: the problems of nickel slag tailings.
Chinese companies, where the majority of
(Sustainable economy) Environmental threats
high-emission work occurs
Source: CSIS, WRI, Reuters

According to a research from UGM, nickel mining can

affect (Case in point: Bahodopi, Morowali, Sulteng):
a. Components:
i. Abiotic: soil and water
ii. Biotic: plants and animals Nickel waste: slag Gold waste:
iii. Cultural: society: social conflict (strike) tailing tailing Coal ash
b. Results: Emission from Cost of Loss from eco Income loss
i. Abiotic: Heavy CO2, Methane, etc deforestation services value: from the
1. Dampala river is polluted from the (Herding, et al) plants and fishermen Production 201.1 million 847 million
70.7 MT
production of animals (BPS) (2022) tonnes tonnes
2. Flood in Bahodopi
nickel (RIT (Herding, et al)
3. Dangerous for agriculture
Polluted water. BBC Sweden) Utilize 1.1 million 687 million
ii. Biotic: Very heavy 70 MT
(2022) tonnes tonnes
1. Sago plants are ruined
2. Threat to anoa, and warthog
Waste 200 million 160 million
iii. Cultural: medium US$90 US US Reduced by
0.7 MT
70% (2022) tonnes tonnes
1. People go on strike vs. PT. AFB mio $450 $334K
mio Percentage
of waste 99% 0.9% 18%

Mandala estimates the total environmental cost regarding

nickel mining and downstreaming is
~US$ 560 million annually
This does not include: Indonesia is currently in the process of
constructing a "captive plant" fueled by coal. Unlike
What’s dangerous about slag tailings is: it could pollute the soil
and water in the area. According to Nickel Study Group, the cost
to create dams for tailing or dry stacking is $22 per tonnes:
Indonesia needs $1 - 2 billions annually.

!! conventional power plants that contribute to the general grid,

these captive plants are specifically designed to cater exclusively !! The government already place regulations on nickel waste:
to the energy needs of industrial or commercial consumer. This ● No deep-sea tailing placement
will generate new emissions to the process.

People go on strike vs. PT. Assumption: ● Using tailing dams, dry stacking or combination of both
AFB. MetroSulteng 1. Emission calculated per tonnes of CO2 equivalent resulted from
Flood at Fatufia Village, each products
Bahodopi, Kompas There are already some research regarding recycling nickel slag
2. Deforestation and eco service were based on Brazil number
deforestation tailings into other products, but it hasn’t been done in Indonesia
3. Fishermen income from BPS and investigative journalists yet. Further research needs to be done
The geopolitical tension could prompt the West to develop LFP sooner,
rendering Indonesia's nickel irrelevant. Meanwhile, China has also already
developed LFP.

European Union
● does not rely on a single country for
more than 65% of its supply of any China
strategic raw material. That is why they ● Indonesia’s nickel mostly go to
really want Indonesian nickel. China.
● In 2031, the EU will require batteries sold ● In China, about 65 percent of EV
in the EU to consist of at least 6% batteries sold today are
USA
recycled nickel. lithium-iron-phosphate batteries
Source of battery must come from
(LFP), a chemistry that contains no
a sustainable practice
nickel or cobalt.
In
The US currently developing LFP W don
TO es
batteries to make them not reliant . ia
ba
on nickel. Ford and Tesla is nne
d
currently at the front or
e
ex
por
t.
EU Japan
w
en
One of the largest
Offer tt
o importer of our nickels
to th
rejec e product
t the US to bu
offer. ild sm
elte r in In
done
sia. T
he U
S

“It’s not that we support China and
anti-America. It’s just that when we ask for help
regarding our downstream policy, China
answer the call. And that’s what we need now.”
Arsjad Rasjid, Head of KADIN
“We went to the US many times and offer what
we have. But they don’t understand what
Indonesia wants, it’s so frustrating”
Luhut BP, Minister of Marves
Australia
Indonesia has a good relationship with
Australia. Australia is a big producer on
first class nickel and wants to export its
Indonesia
product to support Indonesia’s battery
In the middle of China vs. USA in terms of EV and battery development
businesses
What Indonesia already did:
Indonesia also needs lithium from
1. Ask both China and USA to invest in smelter industry
Australia in order to build its ecosystem
2. LBP himself went to the DC to ask for assistance and offer the
for ev battery.
investment
3. The White House reluctant to help because they do not want to be in
the same room with China in Indonesia (political and environmental
concerns)
Contents Nickel 101

1. The process of nickel

2. Economics of nickel

3. Key stakeholders in nickel

4. Key regulations in nickel

5. Top issues in nickel

6. Recommendation

7. What’s next?
Proposed solution from academics, NGOs, think tank:
some worth further research, some are questionable

● Increased research with academics and business

● Research from (Dani Rodrik) Journal of Industry,
regarding:
Competition, and Trade stated that there are several
○ Nickel downstream industry (ITB lecturer)
conditions that need to be met for industrial
○ Battery industry
(manufacturing) policy:
○ Waste management (Tailgate, etc)
○ Maximizes synergies with other policies
○ Should drives innovation, education, and
The policy of prohibiting the export or downstreaming
sustainability
must be accompanied by: LPEM FEB UI
○ Should take high road: support quality and
Research- 1. Developing transportation infrastructure,
sophisticated products and develop and apply new
based policy ensuring a stable power supply, and providing
technologies including the Internet of Things and
China’s dirty business certainty.
artificial intelligence
kitchen 2. Creating a roadmap for the mineral and coal
○ For developing
industry's spatial (region) and industrial (depth)
countries, should
development.
focus on the
3. Establishing coordination and cooperation
eradication of
among relevant Ministries/Institutions to promote
poverty
domestic industry and business through mining
activities.

● Should focus on waste management from smelters,

what are the impacts of current policy:
○ No deep-sea tailing placement (already planned
Is ban is the only option? How to find a win-win situation for by Kemenkomarves)
Environment
WTO problem (Expert, Fiscal Senior Analyst) ○ Using tailing dams, dry stacking or
Nickel ore ○ Tariff binding for nickel ore: raise the export tariff as combination of both (already planned by
export ban high as possible Kemenkomarves)
○ Production control: Production quota based on ○ Develop battery waste program once we have
national demand, leading to no volume to export battery industry focusing on battery recycling

Legend:
Blue: Worth Further Research
Red: Questionable
Contents Nickel 101

1. The process of nickel

2. Economics of nickel

3. Key stakeholders in nickel

4. Key regulations in nickel

5. Top issues in nickel

6. Recommendation

7. What’s next?
What’s next for Nickel?
Also, there are other minerals that has downstream industry potential needs to be explored

The next phase is to create competitive industrial ecosystem for Lithium battery and EV Ore export, in million USD

Green energy:
Nickel mines hydro and
geothermal -
including heavy
Limonite and saprolite with reserves life for 20 years electric vehicles

RKEF Refinery Project Side blown furnace HPAL

MHP and Ni/Co

High grade FeNi Ni Matte and Iron Sulphade Industrial
park (KIPI,
REP, etc.)

Battery Material

Supply chain:
Aluminum,
Nickel based battery Iron based battery copper, cathode
anode
electrolyte

EV Manufacturers in Indonesia Incentives:

1. Investment facilities Keputusan Menteri
(fiscal non fiscal) ESDM Nomor
2. Stimulus to encourage 296/2023
the use of EV 47 critical minerals
Learning from Nauru
How can we make sure case in Nauru will not
happen in Indonesia?

What happened in Evidence of Lesson learned Nauru’s phosphate export (million USD)
Nauru? damage to Narau Source: Dev Policy
● Ensure the implementation
● Since 1970s, Nauru lost at least of sustainable mining
● Nauru was the main practices, characterized by
80 percent of its original
player on phosphate the ability to rehabilitate
vegetation
from 1970s to 2000s the mining area for
● Droughts and storms are alternative uses once
● The country mineral resources have
intensifying
overexploited the been depleted.
phosphate until it dried
● Many phosphate plants were
out ● Additionally, prioritize the
remind unused and left
abandoned design and construction of
● Exported around 80 downstream facilities in a
million MT of Phosphate manner that facilitates their
● All area that were mined could
not be plant with trees or any repurposing for other
● Nauru's phosphate industrial applications.
agricultural products
wealth was not
effectively managed,
● Currently, they depend their
and the country faced
economy from tuna fishings and
financial
trust funds (managed by Taiwan,
mismanagement and
Australia and Nauru)
corruption issues.

Ex mining Ex phosphate
area plant
“...But ultimately what is required for industrial policy to work is far
less than a consistent ability to pick “winners.” …, the ultimate test is
not whether governments can pick “winners,” but whether they
have (or can develop) the ability to let “losers” go.”
Réka Juhász, Nathan Lane, and Dani Rodrik
Thank you