This Week's Headlines (20 - 27 Jan 2023)

27 Jan 2023


  Indonesia's FDI jumps in 2022, led by mineral processing


  Indonesia's foreign direct investment surged 44.2% on a yearly basis in 2022, with the base
  metals sector drawing in the biggest inflows, the investment minister said on Tuesday, noting
  2023 would be a more difficult year to attract investment. 


  Southeast Asia's largest economy received 654.4 trillion rupiah worth of FDI last year, or
  equivalent to US$45.6 billion in the investment ministry's official calculation, which assumes an
  exchange rate of 14,350 to the dollar. 


  The data excludes investment in the banking and oil and gas sectors. 


  The resource-rich country has been trying to capitalise on its abundant nickel reserves to
  develop battery and electric vehicle industries at home. 


  Once a major exporter of nickel ore, it stopped outbound shipments of the raw material in 2020
  to make sure investors have enough for domestic processing. 


  Foreign direct investment in base metals and mining reached $11 billion and $5.1 billion,
  respectively, last year, the biggest recipients of FDI. The biggest sources were Singapore,
  China and Hong Kong. 


  Minister Bahlil Lahadalia said the passage of the controversial Jobs Creation Law in 2020,
  which streamlined business permit procedures and revised labour rules, has also boosted
  investor interests. 


  Total investment, including from domestic sources, reached 1,207.2 trillion rupiah ($81.02
  billion), he said, roughly in line with the government's target. 


  This year's investment target is 1,400 trillion rupiah. 


  Bahlil said global recession risks and the beginning of political campaigning ahead of  
  Indonesia's 2024 general elections could make it harder to secure investment this year. 


  "The potential of recession is big," he said. "If the global condition is not good, how can FDI
  come in?" 


  Jakarta has in the pipeline a plan by Germany's BASF and French miner Eramet to invest $2
  billion to $2.6 billion in an electric vehicle battery ecosystem, Bahlil said, adding they may
  break ground this quarter. 


  BASF and Eramet earlier this month said their Indonesia project was still being assessed. 


  FDI in the final quarter of last year was up 43.3% on an annual basis, amounting to 175.2 trillion
  rupiah in rupiah terms, or $12.2 billion in the official U.S. dollar equivalent. 


  Source: Reuters 




  Copper export ban comes too early, mining firms warn


  A plan to ban the export of copper concentrate starting in June has sparked concern among
  businesses over the readiness of domestic industries to absorb the product. 


  Indonesia is one of the world’s top exporters of copper concentrate, a partially processed
  copper ore that requires further work to increase its purity. 


  From January to November last year, the country shipped out 2.8 million tonnes of the
  commodity worth US$8.4 billion. 


  In a bid to push domestic processing of the commodity, such as smelting, and thereby add
  value to exports, President Joko “Jokowi” Widodo announced the copper concentrate export
  ban on Jan. 10. 


  The move is part of the government’s wider strategy to move up the commodity value chain by
  refining minerals in the country rather than exporting them as ore. 


  The policy is based on the 2020 Mining Law, which mandates a ban on the export of several
  mining commodities three years after its issuance to push downstream industrial development
in commodity-rich Indonesia. 


  Djoko Widajatno, executive director of the Indonesia Mining Association (IMA), estimates that
  the ban would result in an excess of around 1 million tonnes of copper cathodes, given that
  Indonesia currently only has one copper cathode smelter.  


  Operated by PT Smelting Gresik, the facility processes approximately 1 million tonnes of
  copper concentrate annually, a third of Indonesia’s total copper concentrate output of 3 million
  tonnes in 2022, to produce around 300,000 tonnes of copper cathode annually. 


  “The government needs to prepare accommodating rules to encourage the development of the
  downstream copper industry, including ensuring a congruent law and preparing a road map for
  domestic industry development,” he told The Jakarta Post on Thursday. 


  Indonesia is building two more copper smelters, located in Gresik, East Java, and Sumbawa,
  West Nusa Tenggara, and planning other projects to develop its mineral-processing sector and
  take advantage of its vast copper reserves. 


  Agung Laksamana, PT Freeport Indonesia (PTFI) vice president of external affairs, said the
  company supported the government’s downstream initiatives through massive investment in
the construction of domestic smelting and refining facilities. 


  “Construction of the Manyar smelter is on schedule,” he told the Post on Friday, referring to the
  US$3 billion copper cathode smelter project in Gresik slated to be ready by the end of 2023.


  Once fully operational, the new smelter is expected to process 1.7 million tonnes of copper
  concentrate into 550,000 tonnes of copper cathode annually. 


  Copper cathode can be further processed into electrical wiring, pipes and car batteries, among
  other products. 


  “Considering there are no smelters in the country that are capable of processing copper
  concentrate apart from PTFI, the export ban could be pushed back to 2025,” Indonesian
  Mining Experts Association (Perhapi) chairman Rizal Kasli said on Friday. 


  PTFI uses the smelter facility run by Smelting Gresik, in which it holds a 40 percent stake,
  while Japan’s Mitsubishi owns the remaining 60 percent. 


  “Implementing the ban later will be necessary to avoid a copper supply glut in the domestic
  market,” he added. 


  The global copper market is expected to face a shortage in the middle of this decade amid
  rising demand from the push for sustainability with applications such as electric vehicles
  expected to require large quantities of the metal. 


  Japan was Indonesia’s top export destination for copper concentrate at 628,052 tonnes, 28
  percent of the total 2.23 million tonnes exported in 2021, followed by China and South Korea at
  19 and 13 percent, respectively, Statistics Indonesia (BPS) data show. 


  Meanwhile, Indonesia exported 170,000 tonnes of copper cathode in 2022, while importing
  70,000 tonnes of the commodity in the same period. 


  Ahmad Zuhdi Dwi Kusuma, an industry and area analyst at state-owned Bank Mandiri, expects
  Indonesia to need roughly 3 tonnes of copper concentrate to produce 1 tonne of copper


  Thus, under a scenario where Indonesia produces 3 million tonnes of copper concentrate, an
  estimate of 2022 full-year production, and domestic smelters are capable of processing that
  concentrate into copper cathode when the ban is in full effect, the country would have roughly 1
  million tonnes of copper cathode. 


  “Stakeholders would need to develop the domestic market and look for new export destinations
  for copper cathode,” he told the Post on Friday. 


  Copper has begun the New Year on a surge, with funds piling back into the market in
  anticipation of China's rapid emergence from a year of lockdowns translating into recovering
  demand in the world's largest metals buyer. 


  London Metal Exchange (LME) three-month copper broke back up through the $9,000-per
  tonne level last week for the first time since June. Currently trading around $9,130, the copper
  price is up by 9.6 percent year-to-date. 


  Investors played copper from the short side for much of last year, if they were prepared to
  engage at all. Rolling lockdowns in China, an energy crisis in Europe and aggressive rate hikes
  in the United States were all good reasons to give copper a wide berth. 


  Source: The Jakarta Post 




  More than 70 Firms Eye Investment in New Capital Nusantara


  More than 70 private companies have expressed interest to invest in Indonesia’s planned new
  capital Nusantara, according to the capital city authority body chief Bambang Susantono. 


  “To date, more than 70 companies have submitted their letters of interest to the Nusantara city
  authority body,” Bambang said on Monday, as quoted by Jakarta Globe’s sister publication 


  Some of these companies specialize in transportation, education, renewables, sustainable
  farming, and smart city technology, to name a few. This includes the 11 letters of interest inked
  during Malaysian Prime Minister Anwar Ibrahim’s trip to Indonesia, according to Bambang. 


  The private sector will finance 80 percent of the construction of the new capital in East
  Kalimantan. The city's development is on the government’s list of national strategic projects.
  The government also intends to commemorate Indonesia’s 79 years of independence at IKN
  on August 17. 


  Bambang said Indonesia is aware of how pivotal legal certainty is in drawing companies to
  invest in Nusantara. According to Bambang, the project has a solid legal umbrella so the city
  development plans will continue uninterrupted. 


  “Judging by the progress, I’m sure Nusantara will continue to attract many investors from home
  and abroad,” he said. 


  Piter Abdullah, the executive director at Segara Research Institute, said that investors should
  find Nusantara attractive, considering the city’s potential as the new economic epicenter in
  Indonesia. To illustrate, those who invested in the BSD City urban development project in the
  past are now enjoying the fruits of their investment. 


  According to Piter, the government should provide certainty to convince companies into
  investing in Nusantara. He added that infrastructure construction could help boost investors’


  The latest progress on the project shows that the Sepaku 1, 2, and 3 ring roads have reached
  100 percent completion. 


  Construction of the government complex in Nusantara, including the presidential palace and
  office, as well as the presidential secretariat, has already begun. Three private investors have
  also obtained letters to proceed to start building 184 residential towers for civil servants. 


  “Once the government institution buildings finish construction, I'm sure investors will flock to the
  Nusantara project,” Piter said. 


  Source: The Jakarta Globe