Nickel Industry More Profitable for China, Economist Claims

TEMPO.CO, Jakarta - A senior economist from the University of Indonesia Faisal Basri on Tuesday claimed that Indonesia only benefits 10 percent of profit from the Morowali and Konawe nickel ore industry. Meanwhile, the 90 percent profit was immediately felt by the investors from China, which built the smelters in the industrial district. 

He stated that Indonesia is only an extension of China’s industrialization. Faisal Basri believes that he Morowali and Konawe special economic region has yet fulfilled its downstreaming aspect as the facilities to process nickel ore into hydroxide, saying that pure 99.9 percent nickel are nonexistent.

“From the entire value that was created, from the ore processing up to smelter products, only a maximum of 10 percent stays in Indonesia. The rest or 90 percent are enjoyed by China,” said Faisal Basri on a Youtube video session with political observer Refly Harun on July 27. 

According to Basri, the smelter firms only partly process most of the nickel ores into nickel pig irons (NPI) containing only 20-25 percent nickel. With the existing facilities such as tax holidays and export tax reliefs, Chinese investors are able to purchase half-processed nickels a quarter or a third of the international price. 

This only increases Indonesia’s export value but lacks the actual domestic value. Basri believes this is the main reason Chinese investors are attracted with the prospect. 

“That is why there are waves of them coming here. If the factories remain in China they would have to purchase [nickel ores] at US$100 per ton or kilogram but they can purchase them at only US$25-35 by moving to Indonesia” said the senior economist. 

Read: Nickel Export Restriction to Help Local Industries: Luhut

FRANCHISCA CHRISTY ROSANA