Beranda Berita

Why does Indonesia’s nickel export ban upset the EU?

Indonesia is the world's largest nickel producer

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JAKARTA, INDONESIA — The European Union (EU) has filed a lawsuit against Indonesia to the World Trade Organization (WTO) over Indonesia’s nickel export ban, which took effect on 1 January 2021. The export ban aims to give added values to nickel, meaning that nickel will not be exported in the form of raw ore.

Indonesia has imposed a ban on nickel export as stipulated in the Law No.3/2020 on mineral and coal, meaning that nickel must be processed in Indonesia’s smelters before being sold overseas.

Indonesia’s Minister of Trade M. Lutfi stated in the MGN Economic Recovery Summit on 27 January that the EU only buys 2 per cent of Indonesia’s nickel.

However, the EU assumed that the ban on nickel export ruined the bloc’s effort to excel in the world’s stainless steel industry, as nickel ore is the vital ingredient for stainless steel.

Data from The Geological Agency at the Ministry of Energy and Mineral Resources (ESDM) stated that Indonesia contributed 800,000 tons out of 2,668,000 million tons of global nickel production in 2019.

Indonesia is the world’s second-largest producer of stainless steel after China.

During the January-November 2020 period, the stainless steel sector was the third-largest export contributor worth US$ 9.6 billion, after palm oil and coal.

Why now?

The plan to prohibit the nickel export was supposed to start in 2014, five years after the implementation of the old mineral and coal law (Law No.4/2009). However, not all mineral companies were ready with their smelters at that time.

“Right now, only smelters for nickel are ready. The ideal number is 25, but we only have 13 now for nickel,” Bisman Bhaktiar, a mining law expert for PUSHEP told TOC in a telephone interview on 22 January.

There are two copper smelters already operating in Indonesia: A smelter owned by PT Batutua Tembaga Raya in Maluku and PT Smelting in Gresik. The latter is a part of copper giant PT Freeport Indonesia’s responsibility to set up a processing plant as stated in the Working Contract.

Processing mineral ore can provide added value and create job opportunities for local people, Bisman added.

Bambang Gatot, the Director-General of Mineral and Coal said in 2019 that the export ban was related to Indonesia’s thinning nickel reserve-around 700 million tons, meaning that further exploration is needed.

Brussels accused Indonesia of breaching the GATT Article

The EU asked the WTO to set up a panel to settle the dispute. According to the WTO dispute settlement procedure, the Dispute Settlement Body (DSB) established an independent body consisting of three experts to study and issue recommendations on a particular dispute in line with the WTO provisions.

EU law professor Armand de Mastral told TOC on 22 January that from the bloc’s point of view, Indonesia has violated Article XI on the restriction of export and import in the General Agreement on Tariff and Trade.

M. Lutfi stated that Indonesia is ready to face the EU complaints. President Joko Widodo said that Indonesia’s decision to stop nickel ore export aims to boost a downstream industry and open more jobs.