Revisiting Indonesia, this time to evaluate Indonesia’s Nickel Export Policy. Also focuses on theme of wider resource nationalism. October edition of the Mark-Up.

1. A Nickel Ain’t Worth a Dime Anymore: An Exploration of Indonesia’s Nickel Export Policy Harry Purdie
IPX’s Success Story
Whilst 2023 may have been a lacklustre year for global IPO markets, Indonesia’s represents a
very different story - driven by a listing boom, dominated by metals & mining (M&M) and
energy, it is currently on track for what will be a record fundraising year. The Q1-3 2023 success
of Indonesia’s IDX has seen it rank 5th overall on number of completed listings (68 & 7% of
global) and 7th on total proceeds ($3.5bn & 3% of global). Reflective of its enduring appeal to
investors as a result of its commitment to carefully maintained macroeconomic and political
stability, Indonesia continues to remain the leading force in Southeast Asia for listings, including
the top 5 IPO funds raised in SE Asia in 2023 so far.
Number of IPOs
Noticeable amidst this uninterruptedly robust performance has been the composition of the
IDX’s IPO market, which whilst led by tech startups in recent years past, has seen a marked
shift in this trend within 2023. Instead, the energy and M&M sectors, specifically renewable
energy, nickel and other metals, have come to dominate the market and have driven 2023 IPX
performance so far. Sizable IPOs within the M&M and renewable energy sectors, including 4 of
the IDX largest 5, have resulted in an outsized contribution of 79% of total Indonesian IPO
proceeds for PTD (Period-To-Date) Q3 2023.
This impressive year of IPX performance, demonstrates not only Indonesia’s position as a
thriving centre for investment opportunities and business expansion, but also highlights
Indonesia’s rapidly emerging importance amidst the onset of a renewable energy era. The trend
comes as Indonesia seeks to further secure its position as a major player within the ongoing
green transition, leveraging its abundance of mineral resources and its attraction as a market
destination for both investors and industrial operations alike.

2. A Nickel Ain’t Worth a Dime Anymore: An Exploration of Indonesia’s Nickel Export Policy Harry Purdie
A Key Player In Nickel
Nickel in particular represents a major component within Indonesia’s ambitions, with the 2023
listings of nickel companies Harita Nickel and Merdeka Battery smaller only than copper giant
Amman Mineral’s July IPO. The listing of Hartia Nickel earlier in the year, marked a vital test of
investor enthusiasm for President Widodo’s ambitions to make the country a key player in the
global EV market. The EV market represents an industry within which nickel is a vital
commodity, leaving Indonesia which boasts bountiful reserves, as perfectly placed to take
advantage.
Crucially underpinning the strength of Nickel companies performance within its equity market is
Indonesia’s dominance over global nickel reserves. Indonesia holds the world’s joint largest
reserves with up to 21% of global share, yet dwarfs rivalling Australia in production terms
(160,000MT vs 1.6MT in 2022). In 2022, Indonesia mined just shy of 50% of global nickel and
refined narrowly under 40% of global totals [USGS].
Achieving the net-zero scenario will need a 13% decrease in road emissions by 2030,
necessitating 70% of car sales as EV by the same year and in turn requiring a 440% increase of
battery demand by 2030 [IEA]. That 95% of EV batteries are nickel-based within the US and EU
(45% of global battery sales) underlines the centrality of the metal as a crucial mineral resource
in a green transition within batteries and EVs.
Given such significance, nickel demand is expected to continue to climb. Global demand is
expected to rise from 2.4mn tonnes currently to 3.8-4.8mn tonnes per year by 2030 [RFC

3. A Nickel Ain’t Worth a Dime Anymore: An Exploration of Indonesia’s Nickel Export Policy Harry Purdie
Ambrian], with a 22% deficit in nickel expected by the end of the decade. The relevance of
nickel as an increasingly important commodity against the backdrop of continually expanding
long-term demand, places Indonesia in a uniquely empowered position, one which it has
displayed no hesitancy in leveraging.
Context over Indonesian Nickel Policy
Nickel has proved to be a defining element of Widodo’s eight-year long presidency, with his
success in using it to turn Indonesia into a commodity powerhouse as likely to remain his
crowning legacy when he departs his position in 2024. Upon his assumption of office, a global
downturn had seen demand for Indonesia’s commodity offering weakened and with sector
infrastructure heavily underfunded, it remained an unconvincing proposition for attracting foreign
investment. Doing good on his electoral promises to focus on infrastructure, which now remains
the other distinct feature of his tenure, Widodo ensured funding returned; following the
development of a robust infrastructure network across much of the country, Widodo’s Indonesia
earmarked itself as a viable candidate for major industrial investment once more.
It was during his second term, starting in 2019, however, that marked the major shift within
Widodo’s presidency and what followed was a slew of bold and ambitious economic policies,
aiming to build on the optimism generated during the latter half of the decade. The cornerstone
of this strategy involved transforming Indonesia from merely another commodity exporter to a
leading commodity superpower through the creation of a domestic EV supply chain and
establishment as a crucial hub for global electric battery business. His decision to further tighten
the existing 2014 ban on export of raw nickel ore, still highly controversial and subject to
ongoing challenge from the EU at the WTO, was a key signal of his intent to ensure Indonesia
harnessed maximum value from its commodities.
Through banning exportation of their raw materials, Indonesia hoped it would be able to capture
the benefits within value-added stages such as processing and manufacturing, which had
typically been carried out abroad by more industrialised nations, notably China. Already,
following the initial export ban of raw nickel in 2014, over $15bn of foreign investment in nickel
processing, again predominantly Chinese, had flowed into the country. The aim now was to
further consolidate control over key mineral resources, whilst simultaneously aiming to
encourage downstreaming - foreign companies would be forced to set up domestic processing
and manufacturing facilities, potentially whole supply chains, which in turn would further bolster
Indonesian economic output.
Despite a WTO ruling that the ban is unfair, which Indonesia continues to ignore, removal of
nickel ore exports have forced companies including Brazil’s Vale, South Korea’s LG and China’s
Tsingshan to establish local operations in exchange for access to Indonesia’s mineral reserves.
As advertised upon the strategy’s announcement, downstreaming has greatly increased the
value of Indonesia’s nickel product exports, seeing this value grow to nearly 10 times a decade
prior, with total exports hitting a high of $292bn in 2022. Additionally, efforts to develop an EV
industry continue to progress meaningfully; over summer, Hyundai established their second

4. A Nickel Ain’t Worth a Dime Anymore: An Exploration of Indonesia’s Nickel Export Policy Harry Purdie
battery manufacturing plant in the country, whilst Ford reported an investment in a
multibillion-dollar nickel processing facility.
Nickel Outlook
The outlook for nickel unquestionably remains central to evaluating the success of Indonesia’s
policy in coming years. Nickel prices enjoyed a buoyant 2022 with prices rising in spring to
levels not seen since 2007, amidst concerns over the impact of potential conflict in Eastern
Europe on nickel supply. Fears over disruption to nickel supplies as a result of Russia - the
world’s third largest nickel producer at the time (7.5% of global production) - combined with thin
liquidity, saw prices rise to above $48,000/tonne in March. Such events reflected the significant
deficit present at the time, underscored by lack of supply preparedness, a wave of battery
demand and low inventories. Since then, prices have fallen by over 65%, yet despite this they
now reflect closer to normalisation rather than misconceived notions of doom and gloom.
Demand expansion fuelled by energy transition and energy security trends have already started
to, and will continue to be met with increased supply responses which will soften the
fundamental path over the next few years in the mid-term. With a sharp supply growth
acceleration, driven largely by significant production out of Indonesia, a sustained surplus until
the middle of the decade represents the base case scenario and with this likely lower prices.
Per Goldman Sachs [2022], between 2022-25, Nickel demand is forecasted to see 7% annual
growth rates y/y, whilst supply grows at 8% y/y, with a strong Indonesian supply trend driving
this.

5. A Nickel Ain’t Worth a Dime Anymore: An Exploration of Indonesia’s Nickel Export Policy Harry Purdie
In the short-term, current supply shortages as a result of Indonesia’s crackdown on illegal nickel
mining, pose an upside risk to nickel prices. Investigations regarding production have led to
delays in the issuance of quotas for nickel mining within the country, requiring larger quantities
of ore to be imported from the Philippines in order to keep smelters operating. Uncertainty over
when approvals will arrive, has seen domestic manufacturers cut production forecasts whilst
causing premiums for Indonesian nickel ore over the local price benchmark. Prices of Philippine
nickel ore have also jumped as a result (23% since August to $65 per wet metric tonne). Supply
constraints have the potential to feed into higher global nickel prices, which currently sit at just
over $18,100, especially if stockpiled material begins to run low.
Looking further out, Indonesia’s consistently high production, fuelled by strong continued
Chinese investment in domestic nickel reserves, is projected to result in a supply overhang over
the next few years. In order to achieve higher prices, a robust expansion in EV sales which will
likely ramp up following the midpoint of the decade, will be key in bolstering nickel prices as
EV-driven demand eats into that surplus.
Policy Evaluation: Controversial and Bold - Effective too?
When evaluating purely in terms of export value, it’s hard to argue that Indonesia’s aggressive
export policy hasn’t succeeded. Driven by exports of higher value-added products such as
battery materials and stainless steel, nickel-related exports totalled nearly $30bn in 2022, a
huge leap from a mere $6bn in 2013. Yet when looking beyond merely value addition and export

6. A Nickel Ain’t Worth a Dime Anymore: An Exploration of Indonesia’s Nickel Export Policy Harry Purdie
revenues, there is potential for a more intricate assessment of the policies’ advantages and
disadvantages.
Central to this sizable increase has been the willingness of Chinese firms to expand operations
within Indonesia in order to secure access to Indonesian resources. Yet acknowledgement that
the scale of concessional financing offered under China’s Belt and Road Initiative (BRI) was key
to rapid expansion of Indonesia’s nickel sector, represents an important consideration when
assessing the wisdom of similar policy for other commodities. BRI engagement has continuously
evolved since inception, with the the form it finds itself in is no longer equivalent to the one so
central to driving Indonesia’s more nascent nickel industry. The willingness of various
state-owned enterprises, notably banks, to finance the construction of basic infrastructure and
coal-powered plants, were vital to the speed of the industry’s growth. The BRI in its present form
sees private companies play a larger role, with shifted risk evaluations favouring
revenue-generating and resource-backed projects; whilst this represents no issue for funding of
metals & mining, securing funding for construction and infrastructure projects - that were so
tangentially important to the metals & mining sectors’ development - is now a more challenging
feat.
Additional considerations are around the potential second and third order effects of such policy.
In theory, an export ban will act to depress Indonesian nickel prices relative to wider global
prices. Given that it is the nickel mining sector that has effectively been saddled with subsidising
the downstream industries, there is potential for distorted economic incentives in which
exploration for new reserves is now less attractive. Furthermore, whilst banning exports has
encouraged inward investment via forced downstreaming, the policy once more distorts wider
prices and supply. In this case, reduced wider global supply pushes prices up, in turn potentially
leading to innovation of substitutes, exploration of new reserves or application of retaliatory
trade measures from other countries, all of which are - in isolated terms - detrimental to
Indonesian economic interests. Demonstration of this can be viewed within Indonesia and
China’s bauxite trade relationship: 8 years ago, 2/3 of Chinese imports were from Indonesia, yet
a similar ban on bauxite led to China finding alternative suppliers, with Indonesian bauxite now
only composing 1/10 of Chinese imports.
Finally it is worth highlighting Indonesian nickel’s exclusion from the US Inflation Reduction Act,
a major green subsidies law introduced earlier in 2023. Exclusion is justified on the basis of
China controlling significant stakes in mines whilst building most of the smelters. US lawmakers
maintain that inclusion in the deal would effectively subsidise the Chinese companies, given
control they have within the industry via joint ventures. Whilst it currently appears unlikely,
securing exemption for Indonesia would represent a major achievement for Widodo, marking a
fitting end to his steer over a national industry that has been so key to his personal and
Indonesia’s wider fortunes.

7. A Nickel Ain’t Worth a Dime Anymore: An Exploration of Indonesia’s Nickel Export Policy Harry Purdie
Resource Nationalism: A Wider Theme
Indonesia is not alone in its desire to ensure greater capture of value from their minerals. A
broader energy transition has, and will continue to realign the balance of power and wealth that
was so central to the 20th century. This naturally poses challenges for incumbent energy
superpowers, with differing circumstances leading to the creation of tension over how best to
manage existing supply. Such has been highly visible at a national level and perhaps most
palpable within OPEC+ over recent years. Yet such change offers new opportunities for
countries with plentiful reserves of new, more sought after commodities - for the new battery
metal producers, this seismic shift in the power balance represents a welcome change.
Desire to control supply, whether that be via nationalising mineral resourcing or implementation
of export controls is becoming increasingly commonplace within the new commodity hotspots of
the world. In Zimbabwe and Namibia, implementation of new laws have seen export of
unprocessed lithium banned; Chile continues to move towards increased state control over
lithium mining; Mexico is undergoing a new review of existing mining concessions and
Indonesia plans to add copper concentrate to its banned export materials, which currently
already includes nickel ore and bauxite.
Yet countries with newfound power offered by access to sought after materials should proceed
cautiously. It is important to carefully differentiate from the geopolitical power afforded to oil and
gas producers in decades past, whilst also recognizing the perilous path to success that
Indonesia has managed to carefully navigate. The current period within metals is characterised
by geographical concentration of production alongside growing demand, granting authority
within global markets and encouraging bold resource nationalism. Whilst global distribution of
mine production remains highly concentrated across various territories, global distribution of
reserves for various battery metals such as lithium, is broad. Higher metals prices in coming
years will continue to make it increasingly viable to access deposits, previously deemed too
expensive to access, and further expand distribution of mining production.
Argentina’s ascension to a major global lithium supplier (10% of global output), driven by more
business-friendly mining policies than the region’s dominant producer Chile, further exemplifies
the higher risk of substitution that battery metal producers are vulnerable to. Chile, a nation with
the world’s largest lithium reserves, currently is second in mining output (33% globally), yet is
forecast to fall to fourth by 2030 with this share dropping to just 12%. Recent announcements of
semi-nationalisation plans via introduction of private-public partnerships have understandably
spooked investors; by contrast regional rival Argentina’s devolved model, where approval lies
with more lenient local governments, represents a far more palatable offering for mining
companies. This represents an effective demonstration of how an overly aggressive set of
policies run the risk of deterring domestic mining activity, whilst incentivising in favour of an
alternative location and resulting in an overall loss of market share. Such circumstances reflect
a marked contrast in the sensitivity of demand outlook compared to traditional energy
commodities.

8. A Nickel Ain’t Worth a Dime Anymore: An Exploration of Indonesia’s Nickel Export Policy Harry Purdie
Given the above, there are important considerations for the new metals producers of today’s
world to heed. Certainly, Indonesia’s success story in capturing greater value from its resource
reserves paints an attractive blueprint for others to follow, yet such a pathway is fraught with
obstacles and must be recognised as such. Lower geographical distribution of nickel reserves,
and thus greater authority to wield market power, than other metals such as lithium, is a
consideration that must be acknowledged before blindly replicating Indonesia’s policies. Factors
such as higher commodity prices and approaching elections will undoubtedly continue to inspire
resource nationalism; despite this, for newly resource-rich nations there remains value in
pragmatic pursuit of a more sustainable and balanced approach to leveraging their newfound
power.