The energy and mineral resources (EMR) ministry considered to gives special royalties for low-grade nickel to be processed into raw material for downstream product including lithium batteries - Photo by Bilaterals

JAKARTA (TheInsiderStories) – The energy and mineral resources (EMR) ministry considered to give special royalties for low-grade nickel to be processed for downstream product including lithium batteries. Earlier, the government had imposed a zero percent of royalty for coal miners who undertook the downstream activities.

In the Law Number 3 of 2020 concerning Mineral and Coal Mining, it stipulated that for the companies involved in the mineral and coal downstream projects, they will be granted an extension of mining business permits every 10 years until the reserves runs out with the special condition.

Then, based on Government Regulation Number 81 of 2019 concerning Types and Tariffs of Non-Tax State Revenues to the EMR ministry, the revenues from production fees or royalties for nickel is divided into three categories, nickel ore, refined nickel products, and windfall profit in nickel matte price if above US$21,000 a wet metric ton (WMT). For refined products the average royalty is around 2 percent and in the form of nickel ore up to 10 percent.

Recently, Indonesian government estimates that nickel ore production will nearly triple to 71.40 million WMT in 2023 along with the construction of 30 new nickel smelters from last year was estimated to produce 19.31 million WMT. The minister, Arifin Tasrif, has signed the rule on Sept. 18 and effective since Sept. 25, 2020.

In the regulation, it stated in 2021, the nickel ore production will reach 30.10 WMT, then increases to 59.94 WMT in 2022, and 71.74 WMT in 2023. Followed the increase of nickel ore, the processed of the minerals also increased. Domestically processed ore is targeted to increase to 52.14 WMT in 2024 from 12.77 WMT in 2020. There are also an increase in the ratio of nickel ore processed from 66 percent in 2020 to 73 percent in 2024.

The utilization of refined nickel smelters such as ferronickel and nickel pig iron is also targeting rises to 75 percent by 2024 from 70 percent in this year. While, nickel matte from 90 percent to 95 percent. The special staff at the ministry, Irwandy Arif, has said there are 48 smelters currently being built and targeted to operate in 2024, as many as 30 are nickel smelters.

Despite, the government optimism, Indonesian Nickel Mining Association sees the nickel ore production drops 52 percent ​​to 25 million WMT in this year, local media reported. The declined caused large of miners did not carry out their production activities in 2019 and the prices to low.

As for last year, said the secretary general Meidy Katrin Lengkey, low-grade nickel ore production was able to reach 52.76 million WMT, up 138 percent from the realization of production in 2018, which reached 22.14 million WMT. This year, the organization predicted the production to reach 25 million WMT by adding the capacity production has not been able to meet the needs of 12 smelter units has operated in Indonesia.

Since the ban on nickel ore exports, she adds, many miners have chosen not to carry out mining activities cause the local prices are still too low. She hopes that the government could immediately issue binding regulations regarding the benchmark mineral prices and the imposition of sanctions. She believed that until the first quarter of 2021, the supply or availability of nickel ore in several smelters is running out or definitely stop.

“There are several smelters that have been added to the production line, automatic demand for nickel ore raw materials has increased as well. There are 2 new smelters which have started production this year too,” said Lengkey.

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