Possible Missteps in Indonesia’s Minerals Downstreaming Policy

Indonesia's export ban on nickel ore has spurred investment in onshore smelters, driving a significant increase in processed nickel production, which is essential for EV batteries and stainless steel. However, Oxford Economics Lead Economist Sunny Liu cautions against assuming similar success for other minerals. 

In her analysis published on Apr. 18, Liu highlights three key factors behind nickel's success: ample reserves, rising demand in the green energy transition, and limited substitution effects. The replication of this success for minerals like bauxite, cobalt, tin, and copper largely depends on the presence of these conditions.

Unlike nickel, these minerals contend with smaller reserves and heightened substitution risks due to rapid technological advancements. Hence, as Liu pointed out, "Export bans of these other minerals are therefore likely to be risky."

Selecting the "right" mineral with a conducive domestic and external environment could yield another success story, similar to nickel. It could act as a catalyst for economic diversification and spur investments in downstream industries.

However, Liu cautioned that, without the right conditions, this policy could trigger protectionist retaliation, potentially squeezing the country's production out of the global market.