[SMM Analysis] Indonesia's Rare Earth Element Detection Disrupts Nickel Product Exports, and Subsequent Regulatory Details Become the Market's Focus

Background: Pangkalpinang Case Triggers Tighter Regulation of Rare Earth Elements in Indonesia’s Mineral Exports

Recently, the detection issues surrounding Indonesia’s rare earth elements, or Logam Tanah Jarang (LTJ), primarily stemmed from stricter government oversight of related mineral product exports following the Pangkalpinang case. The initial case involved an anomalous export of approximately 390 mt of materials containing rare earth elements and implicated PT Putraprima Mineral Mandiri, PT Sucofindo, and the Pangkalpinang Customs Office. It raised a broader regulatory question: when a mineral product contains rare earth or radioactive elements as associated elements, should the product continue to be treated under its primary export commodity classification or be subject to rare earth-related export restrictions.

This issue quickly rippled through Indonesia’s broader mineral export chain. High-grade NPI, NPI, MHP, alumina, and tin-related products are not themselves exported as rare earth products, but they may contain trace amounts of associated rare earth elements or radioactive elements. Consequently, with regulatory parameters not yet fully clarified, surveyors and customs tended to be cautious, causing a slowdown in LS report issuance and customs clearance for some shipments.

For the nickel industry, the incident quickly became a market focal point, as exports of high-grade NPI, NPI, and MHP were all affected by additional testing requirements. Market feedback indicated that some cargoes experienced short-term port detentions or shipment disruptions, and the impact was not confined to a single enterprise. Some traders also reported that related cargoes faced shipment difficulties during the period of disruption.

Why Rare Earth Elements Matter: Indonesia Strengthens Value Controls Over Critical Minerals Before Export

Rare earth elements have drawn attention due to their extensive application in high-value-added fields such as EVs, permanent magnet materials, electronic products, new energy, and national defense-related materials. For Indonesia, this issue is not only about export customs clearance but also about resource value control. The Indonesian government is placing increasing emphasis on identifying, regulating, and protecting the value of critical mineral resources before they leave the country.

The problem is that rare earth elements often do not exist as standalone products but appear as associated or trace elements in other minerals. If all products containing small amounts of rare earth elements were treated as restricted rare earth exports, normal mineral exports could be disrupted; yet if rare earth content is not identified or regulated at all, Indonesia could lose control over the value of strategic minerals.

The commonly recognized 17 rare earth elements include: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, yttrium, and scandium . In recent market discussions, the testing scope mainly involved these 17 rare earth elements, while radioactive elements such as thorium and uranium also became items of inspection concern.

Rare earth elements are often not produced as independent products but exist in other minerals in the form of associated elements. This also creates a regulatory gray area. If every export shipment containing trace rare earth elements were treated as rare earth exports, many normal mineral shipments could face delays. But if associated rare earth content is not tested at all, Indonesia risks the loss of strategic mineral value.

Therefore, the market’s focus is not merely on whether nickel product exports are disrupted; the larger question is whether Indonesia is entering a new regulatory phase requiring more detailed chemical composition verification for mineral exports.

What Happened in the Market: LS Report Delays and Additional Testing Disrupted Mineral Shipments

According to SMM’s market understanding, the recent testing requirements temporarily affected the export of some processed mineral products from Indonesia. For nickel products, the impact was mainly reflected in three aspects.

Delays in LS report issuance. LS reports are critical documents in the export process, and delays in their issuance directly affect customs clearance and cargo release. According to SMM’s understanding as of July 24, relevant authorities also noted that laboratory testing preparations remained relatively limited, and due to differing interpretations of how to handle rare earth elements during export verification, 102 LS survey reports were still pending.

Short-term port detentions for some cargoes. Market feedback indicated that shipments of some NPI and MHP cargoes were affected, and some traders also mentioned that QMB-related cargoes faced shipment difficulties during the disruption.

Export enterprises required to organize additional testing. The government required testing of 17 rare earth elements and radioactive elements in certain products, and some enterprises were still awaiting testing results or further clarity from surveyors and customs.

Thus, this incident is not a direct export ban on nickel products but a short-term administrative and testing bottleneck arising from unclear regulatory parameters for associated rare earth and radioactive elements.

Impact on the Nickel Market: NPI and Other Nickel Product Exports Mainly Affected by Shipment Pace Disruptions

For the high-grade NPI and NPI market, the short-term impact was mainly on shipment pace rather than production. Some port cargoes experienced delays due to affected LS reports and customs clearance processes. According to SMM’s latest understanding, LS survey reports were being released in batches, and some high-grade NPI cargoes at ports had begun to be released progressively.

As the current disruption primarily occurred in export documentation and customs clearance, the direct impact on NPI production was limited. If LS report issuance and customs clearance continue to normalize, the impact on the overall NPI market is expected to be limited. At this stage, the issue appears more as a short-term export process disruption rather than a confirmed structural restriction on NPI exports.

For the MHP market, some cargoes were also affected by the rare earth-related testing requirements. According to market feedback, some MHP shipments faced short-term inability to ship smoothly during the disruption. Similar to NPI, the core issues centered on LS report issuance, testing requirements, and customs clearance, rather than direct restrictions on MHP production.

The latest Indonesian government coordination outcome clarified that export procedures should refer to the primary mineral product and its derivative attributes, rather than automatically treating associated rare earth elements or radioactive elements in the product as grounds for export restrictions. Therefore, for MHP, the key lies in whether the product can continue to be classified and exported based on its primary product attributes.

Market Feedback and Industry Concerns: Unclear Technical Standards Create Uncertainty for Export Enterprises

Market feedback indicated that rare earth-related testing requirements had already caused real disruptions to Indonesia’s mineral product export chain. According to Arif Perdanakusumah, Chairman of FINI (Indonesian Nickel Smelting Association), at least 120 bulk commodity vessels were unable to sail or depart due to the need to test for rare earth content. He noted that this situation caused losses not only for enterprises but also for the government, primarily because there were still no clear regulations providing technical guidance on rare earth content thresholds.

Industry associations generally understood that this policy was part of the government’s effort to improve mineral governance, but they also stressed that technical implementation still needed re-examination, particularly given that rare earth elements in many mineral products exist only as associated or trace elements rather than primary products. This distinction is especially important for commodities such as nickel, bauxite, tin, and copper, as enterprises' permits and processing designs are primarily centered on the main minerals, and rare earth elements may merely be naturally occurring by-products or associated elements.

The bauxite industry also raised similar concerns. Ronald Sulistyanto, Chairman of ABI (Indonesian Bauxite Association), stated that the rare earth issue should be addressed based on its technical nature and handled by the Ministry of Energy and Mineral Resources, as the ministry possesses the relevant mining and mineral expertise. He emphasized that the key question is whether rare earth elements are primary products or merely associated elements. If they are primary products, relevant export restrictions could apply; but if they are only associated elements, more detailed technical clarification is needed rather than causing widespread export disruptions.

Sari Esayanti, Executive Director of IMA (Indonesian Mining Association), also pointed out that most mining enterprises still center on the primary commodities covered by their permits and existing processing designs. In multiple commodities such as tin, bauxite, nickel, and copper, rare earth elements are typically just associated elements. She also stated that most mining enterprises currently lack adequate facilities or technology to identify, separate, or economically utilize rare earth elements. Thus, new interpretations regarding rare earth element declarations or export obligations have created uncertainty for enterprises.

From an industry perspective, the most urgent need currently is technical certainty. Enterprises require clearer parameters, testing methods, and declaration mechanisms so that all exporters, surveyors, and customs authorities can adopt uniform standards. Without consistent technical guidance, even if the current bottleneck gradually eases, similar shipment delays could still recur.

Latest Government Developments and Resolution Direction: Primary Product Attributes Become the Core Clarification Point

The most important development came from the Indonesian government’s coordination letter dated July 31, 2026. According to the document, the Coordinating Ministry for Economic Affairs convened a coordination meeting on July 30 to discuss export obstacles related to the presence of rare earth elements and/or radioactive elements in mineral products and their derivatives.

Key points from the government coordination included:

• Exports of mineral products and their derivatives should still be conducted in accordance with existing trade regulations, including Minister of Trade Regulation No. 23/2023 on Export Policies and Arrangements and Minister of Trade Regulation No. 22/2023 on Prohibited Export Goods, with reference to subsequent amendments.
• Relevant regulations should be understood as applying to primary mineral products and their derivatives, rather than automatically applying to associated elements within these products. This is the most critical clarification for high-grade NPI, NPI, MHP, alumina, and other processed mineral products.
• If radioactive elements are present in the product, as long as they fall under naturally occurring radioactive material, i.e., NORM (Naturally Occurring Radioactive Material), exports can still proceed. This helps mitigate the risk of trace radioactive elements automatically causing export obstructions.
• Export enterprises, surveyors, and customs authorities should refer to the export attributes of the primary mineral product and its derivatives when handling exports. This provides a basis for the gradual resumption of LS report issuance and customs clearance.
• The Indonesian Attorney General’s Office will concurrently issue a legal opinion, to support the clarification of relevant regulatory interpretations.
• The government plans to accelerate the revision of relevant regulations, including Minister of Trade Regulation No. 23/2023, Minister of Trade Regulation No. 22/2023, and Minister of Energy and Mineral Resources Regulation No. 25/2018. Relevant discussions are expected to commence on August 3, 2026, targeting completion of revisions within approximately one week.

SMM View: Short-Term Export Disruption, but Medium and Long-Term Signal of Tighter Mineral Oversight Released

SMM believes that this rare earth testing incident is a short-term disruption but also an important policy signal. In the short term, as LS reports are progressively issued and customs enforcement parameters become clearer, the impact on NPI and MHP exports is expected to gradually ease. If cargo clearance continues to normalize, the impact on the overall nickel market supply-demand pattern is expected to be limited.

However, the incident also demonstrates that Indonesia is strengthening its oversight of critical mineral element content, export documentation, and resource value protection. Even if this round of disruption is resolved relatively quickly, export enterprises may still face stricter testing requirements, clearer declaration obligations, and tighter coordinated supervision among agencies such as surveyors, customs, ESDM, and the Ministry of Trade in the future.

Subsequent market focus should include:

• whether all previously delayed LS reports can be fully released.
• whether future cargoes will need to undergo complete testing for rare earth elements and radioactive elements.
• whether the government will clarify specific thresholds for rare earth elements, thorium, uranium, and NORM classification.
• whether the revised regulations can clearly distinguish between primary export products and associated trace elements.
• whether high-grade NPI, NPI, MHP, alumina, and tin-related products will face different enforcement standards.

Overall, this incident should not be interpreted as Indonesia directly banning NPI or MHP exports, but rather as a process of regulatory clarification under the backdrop of strengthened oversight of rare earth and radioactive elements. If the subsequent implementation details are clarified quickly, the market impact will largely remain at the short-term level; if rules remain unclear, similar shipment delays and administrative friction could still recur.