Friday, June 14, 2024

Bahlil: Indonesian banks reluctant to finance nickel smelters 

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Gusty da Costa




Minister of Investment/Head of Investment Coordinating Board Bahlil Lahadalia said the majority of nickel smelters in Indonesia are foreign investment despite the fact that 80 percent of nickel mining are owned by Indonesians.

He said the reason for foreign monopoly in nickel smelter is because Indonesian banks do not want to finance the development of smelter industry.

“If businessmen want to finance nickel smelter construction, they need 30 percent to 40 percent of equity, while building a nickel smelter with one furnace can cost US$ 200 million to US$ 250 million. If they want to build 4 furnaces, they need US$ 1 billion or Rp 14 trillion, and if the equity is 40 percent then they have to provide US$ 400 million to US$ 500 million. The question is which Indonesian businessmen can build the smelters?” Bahlil said on Wednesday, January 24, 2024.

He therefore asked the government to encourage Indonesian banks to provide funding for smelters industry in the future.

Responding to criticism that nickel export ban and the development of nickel smelters will only benefit for foreign investors, Bahlil suggests those critics should build the smelters with non-state budget funds.

“We have to stop nickel export to make it possible for the development of smelters. From the smelters construction, we will revenue from the contractors’ tax  payment, value-added tax, and income tax. It is true that we give the smelters tax holidays, but contractors do not get such benefit, only the upstream business. At the same time, we can reduce our trade balance deficit,” he explained.

Earlier, a legislator of the House of Representatives’ Commission VII overseeing energy,  mineral resources and industry, Zulfikar Hamonangan, probed Minister of Energy and Mineral Resources Arifin Tasrif in a hearing that 90 percent of nickel mines in Indonesia was under China’s control.

The lawmaker emphasized that the country should not be overconfident in its dream to become the world’s number one lithium battery producer. He stated the ban on raw minerals export showed that Indonesia has exported nickel in abundance. According to him, China has bagged around US$ 28.4 billion a year from the production of Indonesian nickel.

“China controlled around 90 percent of nickel industry in Indonesia. And China receives 30 percent of tax exemption [from nickel export from Indonesia], whether it is true or not. It is a bizarre policy, considering that local people have been displaced and their [local companies’] permits were revoked,” Hamonangan said during the hearing.

According to data from the Ministry of Investment/Investment Coordinating Board, there are 14 nickel smelters operating in Indonesia. Although the smelter companies are of Indonesian legal entities, the majority shareholders and investors are Chinese.

In 2017, for example, Tsingshan Holding Group invested US$ 2.8 billion to build a high capacity ferronickel smelter plant with an annual production capacity of 2 million tons of stainless steel. Two years later, Tsingshan worked with PT Vale Indonesia to build a US$ 700 million battery grade nickel plant with annual nickel production capacity of 50,000 tons.

Another Chinese investor Zhejiang Huayou Cobalt cooperated with state mining firm PT Aneka Tambang and Shandong Xinhai in 2019 to develop nickel projects that required an investment of between US$ 6 billion and US$ 12 billion.

According to data from the SSEK Indonesian Legal Consultant, there are other Chinese nickel smelter investors such as China National Machinery Import, China Wanxiang, Fujian Pan-Chinese Mining Co.Ltd, Jiangsu Delong Nickel Ind.Co.Ltd, and China Huadi Nickel Alloy.

Gusty da Costa






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