JAKARTA: Indonesia’s nickel smelters association has requested the government delay its new mineral royalty fees until nickel prices on the London Metal Exchange have risen to $17,000 per metric ton, its chairman said on Thursday.
The 3-month nickel contract on the LME is currently trading around $15,600.
Later this month, Indonesia will start imposing higher royalty fees of 14% to 19% on nickel ore output depending on price levels, up from a single tariff of 10%, according to a copy of the regulation.
The semi-refined product nickel pig iron will be charged with a 5% to 7% royalty, while nickel matte will have a 3.5% to 5.5% royalty, the regulation said. That compared with the current 5% single tariff on nickel pig iron and 2% on nickel matte.
“We support the government’s royalty plan, but we need to pick a more appropriate timing,” Alexander Barus, chairman of smelters group Indonesia Nickel Industry Forum (FINI), told Reuters after a meeting with mining ministry officials.
He said the group had asked the Energy and Mineral Resources Ministry to consider waiting until nickel prices on the LME has reached at least $17,000 per ton, a level that would allow companies’ margin to cover the costs from the royalty hike.
Researchers at BMI said earlier this month that they had downgraded their nickel price outlook this year from an annual average of $17,000 to $15,000 per ton due to oversupply conditions while U.S. President Trump’s trade policy added exacerbated risks.
“The issue is, prices of our output, such as stainless steel, nickel pig iron and ferronickel, are also dropping now. It will be onerous with the royalties,” Barus added.
Nickel miners are already struggling with higher costs, including for fuel, Indonesia Nickel Miner Association (APNI) has said, after the government removed subsidies for biodiesel earlier this year. APNI has also called for a delay on the new fees’ implementation.
A senior official overseeing mining at the Energy and Mineral Resources Ministry did not immediately respond to a Reuters request seeking comment.
Royalties on other products such as copper ore, copper concentrate, refined tin will also be raised, among others.
The government previously said the new royalty policy was intended to improve industry governance. It comes as the government’s budget deficit is widening due to a drop in tax revenue and bigger spending for President Prabowo Subianto’s flagship programmes.
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