Indonesia details plans to limit development of nickel smelters

Nickel pig iron plant in Indonesia. (Image from Nickel Mines Ltd.)

Indonesia will limit construction of nickel smelters to ensure new plants produce high-value products and follow green principles in the production process, state news agency Antara reported on Friday, citing the country’s investment minister.

Noting many existing smelters already produce nickel pig iron or ferronickel, Minister Bahlil Lahadalia said Indonesia needed to prioritise using ore reserves to create higher value materials including input for batteries for electric vehicles.

“Now we prefer to push downstreaming with 80% to 100% value addition,” he was quoted as saying.

Nickel pig iron and ferronickel typically contain up to 40% of nickel.

Indonesia banned exports of unprocessed nickel ore in 2020 to promote development of nickel smelting at home.

The government has said that the export value of processed nickel products last year was estimated at $30 billion, or ten times higher than the export value of nickel four years ago.

Smelters in Indonesia often use coal as a source of energy and the minister said that new smelters should be powered by green energy without giving further details.

“Looking forward we will limit development of smelters that are not oriented towards green energy,” Bahlil said.

He did not provide a timeline for the policy. The Investment ministry did not immediately respond to a request for comment.

Previously, a senior official at the energy ministry said that Indonesia’s high-grade nickel ore reserve will only last less than two decades if there are no restrictions on smelter construction.

As of 2021, Southeast Asia’s biggest economy had 15 nickel smelters, a government official previously said.

(By Stefanno Sulaiman; Editing by Fransiska Nangoy and Ed Davies)

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