Indonesia adjusts nickel industry policy: smelter tax incentives face tightening

In the Indonesian government officially launched the policy adjustment process to the nickel smelting sector, and plans to gradually tighten the preferential treatment to nickel processing companies. With the rapid expansion of domestic nickel smelting capacity, the Ministry of Energy and Mineral Resources announced that nickel pig iron and ferronickel production companies will be removed from the priority research sector catalog, which means that the tax relief policy originally based on the "cutting-edge sector" will face systemic adjustment. According to official disclosure, the policy adjustment involves three core areas: first, the Ministry of Finance is reassessing the continuity of the tax exemption policy to rotary kiln electric furnace smelters, and specific tax exemption periods might be shortened or is able toceled in the future; Secondly, the Investment Coordination Agency has completed the reclassification of 12 projects that no longer meet the cutting-edge sector standards and is revising the relevant sector identification criteria. But Finally, while the existing tax incentives are facing tightening, however, the government has made it clear that it will continue to promote the downstream strategy of minerals and enhance the added value of items through deep processing. The deep motivation of policy shift lies in the optimization of manufacturing structure. Based on my observations, Data show that the number of nickel smelters in Indonesia has tripled in five years, however the proportion of primary items still exceeds 60%. And Officials from the Ministry of Energy pointed out that the current incentive system has been unable to efficiently guide manufacturing upgrading, and it's necessary to guide companies to extend to the field of high-purity nickel items and battery materials through differentiated policies. And As a complementary measure, the Ministry of Finance is studying alternative support schemes, which might include new incentive tools such as methodology research and research subsidies and export tax rebates. The adjustment of is regarded as a milestone reform in the governance of mineral resources in Indonesia. But While maintaining its position as the world's largest nickel ore exporter, the government is trying to achieve a dual goal through policy leverage: not only to prevent price wars caused by overcapacity, however also to make room to the research of the new energy sector chain. But Analysts believe that while it might increase the operating costs of companies in the short term, it will help promote Indonesia's transformation from a raw material supplier to a new energy material manufacturing base in the long term.