Bauxite Exports to Stop from June 2023

While halting bauxite ore exports aims to increase added value domestically, the government has been reminded to prepare mitigation measures to stem negative impacts from the policy.

KOMPAS/NINA SUSILO

President Joko Widodo gives instructions to the Coordinating Minister for the Economy Airlangga Hartarto (left) before announcing a ban on bauxite exports at the Merdeka Palace, Jakarta, Wednesday (21/12/2022)..

JAKARTA, KOMPAS — The government plans to cease exports of raw bauxite starting in June 2023. The decision is to follow in the footsteps of the same ban imposed on exports of nickel, which appears to have increased the value of nickel derivatives.

With nickel ore exports banned since 2020, the export value of nickel derivatives increased to US$20.9 billion (Rp 326 trillion) in 2021, from $1.1 billion (Rp 17 trillion) in 2014.

President Joko “Jokowi” Widodo has estimated that nickel exports this year will exceed Rp 468 trillion ($30 billion). The boon in export growth has prompted the government to impose the same policy on other raw materials.

"Starting in June 2023, the government will impose a ban on bauxite ore exports and encourage the national bauxite processing and refining industry," President Jokowi said at Merdeka Palace in Jakarta on Wednesday (21/12/2022), accompanied by Coordinating Economic Minister Airlangga Hartarto and Energy and Mineral Resources (ESDM) Minister Arifin Tasrif.

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He conceded that halting bauxite ore exports would initially cause a decline in export value. However, as in the case of nickel ore, the export value was expected to jump in the second, third, fourth years and all years thereafter, with domestic bauxite processing also expected to increase state revenue from Rp 21 trillion to around Rp 62 trillion.

"So, I have told the minister, [we] shouldn’t be hesitant nor cautious about this policy. We must be optimistic," the President said.

With the export ban covering all types of raw bauxite, including bleached ore, minister Airlangga said all bauxite ore must be processed in the country starting from June 2023.

I have told the minister, [we] shouldn’t be hesitant nor cautious about this policy. We must be optimistic

Bauxite ore is refined to produce aluminum, so the policy is also expected to make savings from reduced aluminum imports. Currently, Indonesia still imports up to $2 billion of aluminum each year. The export ban will affect the downstream industry and suppress foreign exchange from aluminum imports.

Indonesia currently operates four bauxite smelters with a combined capacity of 4.3 million tonnes. As Airlangga stated, more smelters are under construction with an input capacity of 27.41 million tonnes and an output capacity of 4.98 million tonnes.

Indonesia reportedly has 3.2 billion tonnes of bauxite reserves, which Airlangga said was sufficient to supply 12 additional smelters.

Domestically refined bauxite derivative products include alumina, aluminum and refined aluminum ingots, which can then be manufactured into aluminum bars or plates. These aluminum bars and plates can cater to the demand of domestic industries, including the machinery and construction industries.

KOMPAS/ARIS PRASETYO

Construction of PT Well Harvest Winning Alumina Refinery's bauxite smelter in Kendawangan District, Ketapang Regency, West Kalimantan, which has reached 72 percent, Tuesday (4/8/2015).

Capacity mapping

Indonesian Chamber of Commerce and Industry (Kadin) chairman Arsjad Rasjid said Kadin had thrown its support behind the government policy, hailing the policy for buoying the spirit to encourage the downstream industry to create added value for the national economy.

"The spirit is to build something positive for Indonesia," he said.

Aware that some bauxite businesses would be affected because their infrastructure was unprepared for the policy, Arsjad added that Kadin was ready to play middleman in helping to find solution to potential problems. "Otherwise, we will never be ready," he said.

Sammy Hamzah, head of energy and mineral resources at the Indonesian Employers' Association (Apindo), said the domestic industrialization of bauxite should be treated like nickel. Stretching from the upstream to the downstream, the nickel industry not only produced electric vehicle batteries but also electric cars.

The spirit is to build something positive for Indonesia.

Regarding the country’s bauxite downstream industry, Indonesia coordinator Aryanto Nugroho of Publish What You Pay (PWYP) said in a webinar on Wednesday that clarity was needed on what kind of industry would be developed from bauxite.

“The bauxite industry must be clear on what it will build. Will it be only half-finished [products]? ESG [environment, social, governance] must also be applied throughout the bauxite value chain, including environmental standards," he said.

Aryanto also warned against rushing to build as many smelters as possible due the high demand for nickel and bauxite derivative products while the downstream industry was not ready, which might force Indonesia to fall back on exporting processed products straight from the smelters and end up importing finished goods.

Chairman Rizal Kasli of the Association of Indonesian Mining Professional (Perhapi) urged the government to finish building more bauxite smelters, noting that only two smelters were currently operational while 12 other smelters were still under construction.

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It was feared that any delay in completing the smelters would lead to slow domestic absorption of bauxite ore, so Rizal urged the government to remap the capacity of ready-to-operate smelters, in the hope that the ban on bauxite ore exports would run optimally.

"If the mining [output] is far above the absorption capacity, it will result in the suspension of smelting operations and lead to layoffs and multiple [negative] impacts, especially in the regions," he said.

Apindo secretary-general Eddy Hussy said exports of raw commodities, such as nickel and bauxite ores, were still important in the face of global economic uncertainty, not only to increase the trade surplus but also to maintain the people’s economy and the economies of bauxite-producing regions.

"Therefore, it would be better if the government implemented other [related] policies, such as increasing the tax on bauxite exports," he said.

This article was translated by Musthofid.

Note:

The text (caption) of the second photo has been corrected. Location: East Kalimantan has been changed to West Kalimantan. While the description of the time has been added to Tuesday (4/8/2015).