Indonesia Nickel Smelters Seek Royalty Fee Delay

The Indonesian nickel smelters association has formally requested that the government postpone implementing new mineral royalty charges until nickel prices on the London Metal Exchange (LME) reach $17,000 per metric ton, according to the association’s chairman.

Currently, the 3-month nickel contract on the LME is being traded at about $15,600.

Later this month, Indonesia is scheduled to introduce elevated royalty fees ranging from 14% to 19% on nickel ore production, contingent on price brackets. This marks an increase from the existing fixed rate of 10%, based on official documentation.

The regulation stipulates that semi-refined nickel pig iron will incur royalties of 5% to 7%, while nickel matte will be subject to a 3.5% to 5.5% royalty. This is a shift from the present flat rate of 5% on nickel pig iron and 2% on nickel matte.

Alexander Barus, who leads the Indonesia Nickel Industry Forum (FINI), stated that while they support the government’s royalty initiative, they believe a more opportune moment is needed. He made these comments following a meeting with representatives from the mining ministry.

Barus mentioned that the group has appealed to the Energy and Mineral Resources Ministry to consider delaying the implementation until LME nickel prices hit a minimum of $17,000 per ton. They believe this threshold would enable companies to maintain sufficient profit margins to offset the increased royalty expenses.

BMI researchers indicated earlier in the month that they had revised their nickel price forecast for the year downward, from an average of $17,000 to $15,000 per ton, citing oversupply concerns and the impact of U.S. trade policies.

Barus emphasized that the prices of their outputs, including stainless steel, nickel pig iron, and ferronickel, are also declining, which will make the royalties particularly burdensome.

The Indonesia Nickel Miner Association (APNI) has reported that nickel miners are already facing increased operational costs, partly due to the removal of biodiesel subsidies by the government earlier this year. APNI has also voiced its support for postponing the introduction of the new fees.

A high-ranking official responsible for overseeing mining operations at the Energy and Mineral Resources Ministry has not yet provided a response to a request for comment.

Royalties on other commodities, such as copper ore, copper concentrate, and refined tin, are also slated for increases.

The government has previously stated that the revised royalty framework aims to enhance governance within the industry. This adjustment occurs as the government grapples with a growing budget deficit, stemming from reduced tax revenues and increased expenditures on key programs of President Prabowo Subianto.