Indonesia’s Kepmen ESDM No. 365.K/MB.01/MEM.B/2026 (“Kepmen 365/2026”) regulates the use of subsidiaries and affiliates as mining-service providers by holders of mining business permits (IUPs) and special mining business permits (IUPKs). It regulates mining contracts, not bauxite sales; its market impact depends on how many producing mines rely on affiliated contractors. The decree took effect on 18 September 2026.
Under Clause 1, an IUP or IUPK holder using mining services must prioritise licensed service companies in the district or city around its mining area. Clause 2 prohibits the holder from involving a subsidiary or affiliate in mining services without ministerial approval. Clause 3 specifies two ownership links for this prohibition: direct shareholding by the IUP or IUPK holder in the mining-service licence holder, or at least one common ultimate beneficial owner between them. It does not separately name the reverse shareholding direction or a common parent that does not result in a common ultimate beneficial owner. Those structures should therefore not be described as expressly covered by Clause 3 without examining the actual ownership chain.
The approval route is limited. Under Clause 4, an exception may be approved for an IUP or IUPK holder carrying out a government assignment involving a national strategic project, construction of a mineral processing or refining facility, coal development or utilisation, or fulfilment of domestic mineral or coal needs. For bauxite, the processing or refining and domestic mineral-supply categories are the most relevant. The listed activities do not mean every integrated mine or domestic bauxite supplier automatically qualifies: the IUP holder must be undertaking a qualifying government assignment, and approval remains necessary. An IUP using a group contractor without such an assignment has no general approval route stated in this decree. It may consequently need to arrange services through a contractor outside the defined affiliate relationships.
This distinction changes the risk for different mines. An IUP using an independent mining contractor has limited direct exposure to the affiliate prohibition, although the local-provider priority remains relevant when it procures services. An IUP using a group company first needs to establish whether its ownership relationship falls within Clause 3. If it does, the next question is whether the IUP holder meets Clause 4’s government-assignment condition. A qualifying mine can seek approval to continue using its affiliated provider; a mine that does not qualify may need to change its contracting arrangement. The resulting cost or disruption will depend on how readily it can secure a suitable alternative.
For a qualifying application, Clause 5 directs the IUP or IUPK holder to apply to the Minister. Clause 6 provides a period of 14 working days from receipt of a complete and correct application for the approval decision. Under Clause 7, approval is confined to the mining-service provider’s licensed field and subfield and runs only until its licence expires. The decree text does not provide for deemed approval if no decision is issued after 14 working days. Nor does it say that filing an application alone authorises the affiliated contractor to operate.
An integrated alumina refinery is exposed through its captive mine’s operations, not through the related-party sale of bauxite. If that mine relies on an affiliated service provider, the group must assess the ownership test and whether the IUP holder is undertaking a qualifying assignment. Refinery ownership alone is not grounds for approval. If the mine must change contractors or its output is delayed, the refinery may need to source compatible ore from other IUPs, adjust its feed blend, or use inventories. A reduction in alumina output would depend on the duration of any interruption and the availability of replacement bauxite.
Existing contracts remain an important implementation question. Kepmen 365/2026 revokes the 2010 director-general regulation on approvals for affiliated mining-service companies under Clause 11, but states no express transition period and does not explain the treatment of contracts or approvals already in place. The text therefore supports neither an assumption that existing arrangements are automatically grandfathered nor a claim that they are automatically cancelled. How ESDM handles those arrangements will matter more to near-term mine output than the 14-working-day decision period alone.
The decree contains no separate test based on foreign ownership. For a foreign-owned bauxite IUP or an integrated foreign-owned refinery, the relevant questions are the relationship between the IUP holder and its mining-service provider, and whether the IUP holder qualifies for the limited approval route. A foreign-owned refinery that merely purchases bauxite is exposed indirectly through any affected supplier.
The national bauxite and alumina impact remains uncertain rather than demonstrably large. The missing evidence is how many producing bauxite IUPs use contractors covered by Clause 3, how much ore they supply, and whether their arrangements qualify for approval or require replacement. If only a small volume is affected and contractors can be changed without interrupting output, the effect will be concentrated in procurement and operating costs. If major captive or merchant mines cannot maintain their mining schedules, refineries could compete for replacement bauxite and face higher delivered costs. For now, the decree creates a clear contracting risk, but a wider supply or price effect has yet to be demonstrated.
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