In an article for the South China Morning Post, Resty Woro Yuniar averred that Indonesia was planning to file an appeal against the World Trade Organization’s EU-leaning ruling on its nickel ore export ban. Experts claim, however, that this is an unwinnable case that will cast a shadow of doubt on the investment climate in one of Southeast Asia’s biggest economies.
The WTO’s ruling in favor of the European Union’s complaint against Jakarta, along with the Indonesian government’s decision to appeal, were revealed on November 21, 2022, by, Arifin Tasrif, energy and, mineral resources minister, before the organization’s formal announcement on November 30.
It is important to note that Indonesia has the world’s largest reserve of nickel ore. The nation had implemented its ban on nickel ore export ahead of schedule in January 2020. The goal was to generate higher-value nickel products and to help Jakarta become a part of the global electric vehicles (EVs) supply chain.
The move was not viewed favorably by Brussels who saw it as a violation of Article XI of the 1994 General Agreement on Tariffs and Trade (GATT). This article states that all WTO members must refrain from prohibiting or restricting imports or exports. Governments are allowed to levy duties, taxes, and other such charges. However, the European bloc claimed that Jakarta’s restrictions limited access to nickel ore and other raw materials in an unfair manner.
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Nickel ore export ban created an artificial nickel shortage
In effect, the nickel ore export ban created an artificial nickel shortage and disrupted Eustainless steels-steel industry. Nickel is the main component of stainless steel and the sector employs approximately 230,000 workers in Europe.
During the course of a House of Representatives hearing, Arifin highlighted that WTO’s decision “does not yea t have permanent legal force so there is still an opportunity for appeal”. He also added that there was no need to change or revoke policies before the WTO’s Dispute Settlement Body (DSB) takes a final call on the matter.
Bill Sullivan, a senior foreign counsel specializing in mining projects at the Jakarta-based law firm Christian Teo & Partners, opined that any such appeal was bound to fail as “none of the exceptions in Article XI apply”.
An appeal, in this case, would also give the impression that Indonesia, which hosted the G20 annual summit earlier this month, was only likely to cooperate with international law when it could potentially benefit from it. Refusing to comply or delaying “could be seen as Indonesia ‘thumbing its nose at the WTO and GATT 1994” which in turn would be “a big problem” for the country.
The WTO decision was made on October 17. It is expected to be announced on November 30 and to be on the DSB’s agenda on December 20. Given the situation, Arifin defended Indonesia’s decision to ban nickel ore exports. He claimed that this was done in order to add value to nickel through ‘downstream’ whereby the mineral is processed to make more expensive products.
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Jakarta would appeal to the WTO
President Joko Widodo has declared on multiple occasions – including this month – that Jakarta would appeal to the WTO in order to delay the process of having to roll back the nickel ore export ban. Arifin opined that this ban should not be revoked – especially given the fact that Indonesia was unable to create Class 1 nickel for the time being due to a lack of technological knowledge. Class 1 Nickel happens to be a critical component in EV batteries.
In a similar vein, Indonesia announced in January that it would impose export bans on tin, copper concentrate, and bauxite. The WTO’s ruling is likely to force Jakarta to think twice. Sullivan stated that what the country had done with nickel was “one of the big success stories of Indonesia’s insistence upon local downstream processing and refining of all metal minerals”. It is hardly surprising then that the government would like to “replicate that success” with other metals.
Indonesia has earned billions of dollars from stainless steel producers, battery makers, and car manufacturers since the implementation of the nickel ore export ban. These organizations arrive to set up smelters or other nickel processing facilities. Most of them happen to be Chinese firms.
For instance, Chinese battery giant Contemporary Amperex Technology (CATL) recently signed a deal with the Hong Kong-based CMB International Capital Corporation and the Indonesia Investment Authority to target around US$2 billion for the development of an Indonesian end-to-end EV value chain.
CATL also set up a joint venture with Chinese stainless-steel giant Tsingshan Holding Group and Chinese battery recycler GEM to produce lithium-ion batteries in Central Sulawesi which is Indonesia’s nickel mining hub. Other players who are interested include South Korean battery maker LG Energy Solution, LG Chem, carmakers Hyundai and Toyota, and the Taiwanese tech giant Foxconn.