Indonesia considers export tax for products with less than 70% nickel content

Indonesia is exploring the possibility of levying an export tax on nickel products with less than 70% nickel content to drive expansion of its domestic processing industry, Investment Minister Bahlil Lahadalia said on Friday.

Indonesia is keen to develop a full supply chain for nickel, from extracting ore from its rich nickel reserve to producing batteries and assembling electric vehicles (EVs) at home.

Most nickel products exported from Indonesia have nickel content of 30% to 40% and could be refined further domestically to at least 70% content, Bahlil told a virtual media briefing.

“If producers want to export the products with less than 70% nickel content, it is possible that we apply an export tax,” he said, adding that discussions were at an early stage and no details had been decided yet.

Indonesia’s processing industry is dominated by low-nickel content products such as nickel pig iron or ferronickel. It halted exports of unprocessed nickel ore last year to support its “downstream” supply-chain ambitions.

The country has a lot of bargaining power to attract downstream investments, but policy changes could spook some investors, said Steven Brown, an independent mining industry consultant.

“Sudden export restrictions can cause uncertainty and may scare off the more cautious investors,” Brown said. “Indonesia has already been successful in attracting some big investments, such as the Hyundai and LG battery plant that is now under construction.”

On Thursday, South Korea’s LG Energy Solution (LGES) and Hyundai Motor Group started building the $1.1 billion plant to make batteries for electric vehicles.

(By Fransiska Nangoy; Editing by Pravin Char)