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Indonesia Braces for Impact as Philippines Considers Nickel Export Ban

Indonesia’s nickel smelter industry is on edge as the Philippines, a key supplier of raw nickel ore, contemplates a sweeping export ban to bolster its domestic processing sector. Industry experts warn that such a move could disrupt supply chains, inflate global nickel prices, and challenge Indonesia’s position as a leading player in the critical mineral market. With over 97% of Indonesia’s nickel ore imports last year sourced from the Philippines, the potential ban—slated for possible implementation within five years—has sparked urgent calls for diplomatic efforts and strategic diversification.

The proposed legislation, which could be ratified by the Philippine Congress as early as June, mirrors Indonesia’s own earlier policy of banning raw mineral exports to encourage domestic value addition. Senate President Francis Escudero confirmed on 6 February that the ban would allow miners a transition period to establish processing facilities. While the move aims to strengthen the Philippines’ economy, it raises significant concerns for Indonesia, where nickel is a cornerstone of industrial growth and a vital component in the global energy transition, particularly for electric vehicle batteries.

A Looming Supply Crunch

Indonesia imported a staggering 10.47 million tonnes of nickel ore in 2024, up from just 374,468 tonnes the previous year, according to Statistics Indonesia (BPS). This sharp increase underscores the country’s growing reliance on foreign supplies, despite possessing over 5.3 billion tonnes of domestic nickel reserves. The Energy and Mineral Resources Ministry has cautioned that, at current production rates of 175 million tonnes annually, these reserves could be depleted within 30 years—or sooner if extraction intensifies.

The Philippines’ potential ban threatens to exacerbate this vulnerability. Djoko Widajatno, a mining advisory board member of the Indonesian Nickel Miners Association (APNI) and former executive director of the Indonesia Mining Association (IMA), described the development as “a cause for concern” for Indonesia’s smelter industry. Speaking to The Jakarta Post on 15 February, he highlighted the need for Indonesia to explore alternative suppliers such as Russia, Australia, and Canada. However, he cautioned that logistical and trade challenges in these markets could destabilise supply chains, potentially leading to production delays and cost overruns.

Tri Winarno, the coal and mineral mining director general at the Energy and Mineral Resources Ministry, acknowledged the issue, stating on 16 February that the government is assessing the potential impact. “If the Philippines were to ban nickel ore exports, we would conduct exercises to measure the impact,” he told reporters in Jakarta. While the ministry has defended imports as a means to extend domestic reserves, the looming ban has intensified scrutiny of Indonesia’s long-term resource strategy.

Economic Ripples and Global Price Pressures

Beyond immediate supply concerns, analysts warn that a Philippine export ban could trigger broader economic consequences. A reduction in raw nickel ore exports from the Philippines—one of the world’s top suppliers—may drive up international nickel prices, increasing raw material costs for Indonesia’s processing industry. This, in turn, could erode profitability for smelters already grappling with domestic licensing delays and ore shortages.

Moreover, the ban could reshape investment dynamics in the region. As the Philippines develops its own downstream processing capabilities, it may emerge as a direct competitor to Indonesia, which has invested heavily in becoming a global hub for nickel refining. This shift could divert foreign investment away from Indonesia, particularly if the Philippines offers incentives to miners and processors during the transition period.

Yet, some industry leaders see a silver lining. Djoko of APNI suggested that a Philippine export ban could boost demand for Indonesian nickel, provided domestic players ramp up production. “This could be an opportunity for local industry if we can meet the demand,” he noted. Similarly, Singgih Widagdo, chairman of the Indonesian Mining and Energy Forum (IMEF), downplayed immediate concerns, pointing to the government’s 2025 domestic production target of 220 million tonnes. Speaking to The Jakarta Post on 16 February, he argued that last year’s surge in imports was a temporary anomaly caused by delays in approving work plans and budgets (RKAB), which hampered local output. “There is no reason to worry if we focus on strengthening our downstream industry,” he added.

Challenges for the Philippines’ Mining Sector

In the Philippines, the proposed ban has sparked debate within the mining community. The Chamber of Mines of the Philippines (COMP) and the Philippine Nickel Industry Association (PNIA) have voiced concerns over potential mine closures and layoffs if exports are curtailed before processing infrastructure is fully developed. Dante Bravo, president of PNIA, told Bloomberg on 11 February that while nickel ore output is expected to recover in 2025—buoyed by demand from Indonesia and China—the ban could disrupt short-term stability. He also noted that Indonesia’s smelters are currently facing ore shortages due to government licensing bottlenecks, further driving Philippine exports.

Despite these challenges, the Philippine government remains committed to balancing economic growth with sustainability. In a statement to The Jakarta Post on 17 February, the Philippines Embassy in Jakarta emphasised its dedication to fostering strong trade relations with partners like Indonesia. “Our policies are guided by the goal of ensuring long-term economic growth, value addition, and sustainability in key industries, including the minerals sector,” the statement read. It added that discussions on mineral resource policies are ongoing, shaped by industry needs and national priorities.

Strategic Responses and Regional Implications

For Indonesia, the potential ban underscores the urgency of diversifying supply chains and bolstering domestic production. The government has already signalled its intent to curb nickel output in 2025 to support global prices, as reported by The Jakarta Post. However, this strategy must be balanced against the risk of supply shortages if alternative sources fail to materialise. Engaging in proactive diplomacy to secure access to nickel from other countries will be critical, though experts warn that each market presents unique challenges—from geopolitical tensions with Russia to high transport costs from Australia and Canada.

The broader implications of the Philippine policy extend beyond bilateral trade. Nickel is a linchpin of the global energy transition, essential for manufacturing batteries used in electric vehicles and renewable energy storage. A supply disruption in South East Asia, home to some of the world’s largest nickel reserves, could ripple through international markets, slowing progress toward net-zero emissions targets. Singgih of IMEF highlighted this dynamic, noting that the Philippines’ ban could position it as a key supplier for energy transition technologies, potentially reshaping global investment patterns.

Risks and Opportunities

As the Philippines moves closer to a decision on its export ban, Indonesia faces a delicate balancing act. On one hand, the country must safeguard its smelter industry—a vital economic driver—by securing alternative nickel supplies and addressing domestic production bottlenecks. On the other, it has an opportunity to solidify its dominance in the global nickel market by accelerating downstream processing and capitalising on potential demand surges if Philippine exports decline.

However, these opportunities come with caveats. If the ban drives up costs or diverts investment, Indonesia’s smelters could face profitability challenges, particularly for smaller players unable to absorb price shocks. Additionally, while domestic production targets are ambitious, achieving them will require streamlined licensing processes and significant investment in mining infrastructure—areas where delays have historically posed problems.

For now, the situation remains fluid. The Philippine Congress has yet to finalise the legislation, and the five-year transition period offers a window for both countries to adapt. Yet, the stakes are high. As Tri Winarno of the Energy and Mineral Resources Ministry put it, the government is prepared to evaluate all scenarios. Whether Indonesia can turn this challenge into an opportunity will depend on swift policy responses and a willingness to innovate in a rapidly evolving global market.

In the meantime, industry watchers and policymakers alike are keeping a close eye on developments in Manila. The outcome of this proposed ban could redefine South East Asia’s role in the nickel trade—and, by extension, the future of the global energy transition. For Indonesia, the clock is ticking to forge a resilient path forward.

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