Indonesia to ban bauxite exports next year to boost processing at home

Indonesia said Wednesday it would ban bauxite exports next year to add value to the resource by increasing domestic processing, like it has done for nickel ore.

President Joko “Jokowi” Widodo has been pushing for the commodities-rich nation to evolve into an exporter of more lucrative processed metals than ore; bauxite is used to make aluminum. 

“[S]tarting in June 2023, the government will impose a ban on bauxite ore exports and encourage processing and refining of bauxite in the country,” Jokowi said at the State Palace in Jakarta.

But as was the case with a dispute at the World Trade Organization on the nickel ban, Jokowi said he expected the bauxite ban to be challenged as well at the WTO. However, this should not deter Indonesia, he said.

Jokowi said he believed domestic processing of bauxite ore could boost state revenue from the commodity to 62 trillion rupiah (U.S. $4 billion) annually, from 21 trillion rupiah currently. 

Indonesia is the world’s sixth‐largest producer of bauxite and holds the fifth‐biggest reserves, according to a U.S. Geological Survey report.

According to the Indonesian Customs Department, China imported 17.8 million tons of bauxite from Indonesia in 2021, and 17.98 million tons in the first 11 months of this year, accounting for 15.6% of its total imports.

Chief Economic Minister Airlangga Hartarto said that Indonesia currently has four bauxite smelters with a total annual capacity of 4.3 million tons.

Airlangga said Indonesia’s bauxite reserves stood at 3.2 billion tons.

“Our reserves can last 90-100 years. There’s still enough,” Airlangga told reporters.

Indonesia has been criticized for its protectionist measures to meet domestic demands and lower prices. 

Meanwhile, it is appealing a WTO ruling which said that Jakarta’s 2014 ban on nickel ore exports was not justified because the country did not face a shortage of the metal.

The European Union (EU), which lodged a complaint before the WTO, had argued that the ban unfairly restricted steel producers’ access to the ore.

Indonesia, for its part, wants to add value to its metal reserves by attracting investments in the processing industry – the ore is smelted into nickel, a key component of batteries for electric cars.

Jokowi said last month the value of Indonesia’s nickel exports had jumped to U.S. $20.8 billion (326.6 trillion rupiah) last year, from just $1.1 billion (17.3 trillion rupiah) in 2017, thanks to the government’s initiative to develop the domestic nickel processing industry.

On Wednesday he said the value in 2022 was expected to top $30 billion. 

Possible WTO suit

Analysts said the bauxite export ban could trigger a lawsuit at the WTO by importing countries, including the United States, the European Union, Canada and China.

“It could face the same fate as the nickel ban,” University of Indonesia economist Ninasapti Triaswati told BenarNews.

Domestic processing may not necessarily benefit Indonesians if it is done without regards to environmental impacts, she said.

“Environmental damage is a long-term cost that is often not taken into account but is very detrimental to the people,” she said.

Besides, countries could look elsewhere for bauxite instead of investing in Indonesia, said Yayan Sayakti, an economist at Padjadjaran University in Bandung.

“For developed countries … technology is more expensive than natural resources,” Yayan told BenarNews