Indonesian smelter reiterates its opposition to mineral benchmark prices

SMM5 March 26: recently, the Indonesian smelting industry rejected the proposal to buy low-grade nickel ore from nickel miners. Previously, the Indonesian Minister of Energy and Mineral Resources Regulation No. 11 of 2020 on mineral reference prices set out the formula for calculating nickel commodities. The regulation is the third amendment to the 2017 Ministerial Regulation No. 07 on Energy and Mineral Resources, which deals with the process of determining benchmark prices for the sale of metals and coal minerals.

Puri Prihadi Santoso, president of the Indonesian Manufacturing and purification Industry Association, said the Ministry of Industry is working on a price formula to represent smelters. Because the price formula in the regulations often only represents the proposal of the miner, the price of nickel ore purchased from the miner is between $22 and $26.

He said he rejected the formula for calculating the price of nickel in the regulation, and so far no agreement has been reached between mining entrepreneurs and smelters on the price of nickel ore. The Ministry of Industry, represented by the General Administration of Ilmate, still provides guidance on finding win-win solutions, the Ministry of Maritime Affairs and Investment will call back to both sides, and the Ministry of Economic Affairs Coordination hopes to look at the optimization of national tax revenue from a downstream perspective, Prihadi said.

Meydy Katrin Lengkey, secretary general of the Indonesian Nickel Mining Association (APNI), said that the mineral benchmark price (HPM) is the legal umbrella and legal certainty of the miners. Up to now, prior to the ESDM Ministerial decree No. 11 on mineral benchmark prices in 2020, the sales price of nickel ore was determined by the smelting industry. However, since the smelting industry has not yet been agreed through the processing and purification Industry Association (AP3I), the regulation has not been fully implemented.

Meydy said the smelter proposal undermined justice and hurt the miners and was a form of violation of article 33 (3) of the 1945 Constitution, which states that land, water and natural resources are controlled by the state and are used to maximize the prosperity of the people. At present, the basic price reference for the smelting industry is 1.8%, with an average price of US $22 per wet metric ton.

However, the HPM of nickel in May 2020 was US $27.17 per wet metric tonne, and in fact, the production cost per tonne of nickel mine (HPP) reached US $20.34. He said miners would suffer losses of $1057 a tonne.

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