Indonesian mining sector to bank on refined metals for growth

REFINED metal shipments are set to overtake coal and unprocessed ore, as Indonesia's mining exports move up the value chain, according to forecasts in a Fitch Solutions report.

Shipments of steel, nickel and such as nickel pig iron have been tipped to dominate export growth in the next five years. For instance, nickel production could more than triple from 25,700 tonnes in 2019 to nearly 85,000 tonnes in 2025, under Fitch estimates.

The growth in exports is expected to be driven by increasing demand in China, where nickel - used in electric vehicle (EV) batteries - could feed a coming boom in EV production.

On the other hand, unprocessed metal exports are "on borrowed time", the Fitch analysts wrote, pointing to the recent implementation of a nickel ore export ban in Indonesia. Bauxite, copper and tin are some other segments believed to be next on the chopping block.

Meanwhile, the top markets of India and China are already weaning themselves off Indonesian coal, even as policymakers divert the resource domestically, towards a growth in power plants.

Fitch projected that coal-fired electricity generation will increase by about 6 per cent annually in the next 10 years, as more than three-fifths of power projects in the pipeline are coal-based.

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"Government policy in Indonesia will remain focused on moving the mineral industry up the value chain in the coming years," the Fitch report said.

"A combination of policies ranging from investment incentives for metal refiners to outright bans on the export of unprocessed ores will be implemented in order to direct investment into higher value-added mineral activities and away from exporting raw minerals."