Miners may face higher costs amid Indonesia's proposal to hike royalties on metals

Some traders and miners operating in Indonesia said operating costs might increase if the proposed higher mining royalty payments were enacted, particularly in the cobalt, copper and nickel sectors.

Indonesia's Ministry of Energy and Mineral Resources (Kementerian Energi Dan Sumber Daya Mineral or ESDM) is considering increasing royalty rates and non-tax state revenues (Pendapatan Negara Bukan Pajak or PNBP) for mineral and coal commodities. The proposed changes were discussed at a public consultation on March 8.

Nickel

Higher royalties were proposed for nickel ore, nickel matte, nickel pig iron and ferronickel.

For nickel ore, an incremental rate of 14% to 19%, depending on the mineral reference price (Harga Mineral Acuan or HMA), was proposed versus a sole tariff of 10%.

The ESDM revised the HMA calculation method on March 1, 2025, which is now "based on the average LME spot settlement prices from the 5th to the 25th of the previous month, and this HMA will serve as the basis for determining the HPM for that period," it said. HPM, or Harga Patokan Mineral, is the Indonesian government's mineral benchmark price.

Australia's Nickel Industries said March 12 that "... if the proposed royalty increases were legislated, the royalties paid would have increased by approximately $8 million," which it based on sales revenue of $205 million in 2024 from the Hengjaya mine operated by PT Hengjaya Mineralindo.

Should the proposed royalties become legislation, the impact for Nickel Industries "is only on the nickel ore sales," it said.

Nickel markets in Asia saw moderate price gains in the week ended March 12 amid cost concerns among participants, with Indonesian nickel pig iron and Philippine nickel ore prices both edging higher.

Platts assessed Indonesian NPI with 10% nickel content at $119/mtu FOB Indonesia March 12, a 30 cents/mtu increase from the previous day and a $1/mtu gain week over week. It was assessed at the same level March 13.

"As Indonesian royalties will impact almost exclusively nickel ore, don't think that it will have a big impact on MHP (mixed hydroxide precipitate) supply. The impact could be higher for NPI (nickel pig iron) since prices are already up," a European trader told Platts, part of S&P Global Commodity Insights, on March 13.

Platts assessed high-grade nickel ore (1.6% Ni content) at $63/wmt CIF China March 12, up 50 cents/wmt day over day and $1/wmt week over week. The price reflects the spot value of nickel ore normalized to 1.6% nickel content for cargoes with 1.5%-1.8% nickel content delivered to major Chinese ports. It was assessed at the same level March 13.

Also, Platts assessed low-grade nickel ore (1.3% Ni content) at $41.50/wmt CIF China March 12, up 50 cents/wmt day over day and $1/wmt week over week. The price reflects the spot value of nickel ore normalized to 1.3% nickel content for cargoes with nickel content of 1% to below 1.5%, delivered to major Chinese ports. It was assessed at the same level March 13.

The trader added that so far, there has been no impact on European nickel sulfate prices as the Asia-Europe markets were not really connected.

Several major traders said the full effect of the proposed higher royalties remained uncertain.

"... we understand that the public consultation periods are typically 3-6 months. There is no guarantee that the proposed royalties will be implemented," Nickel Industries said.

Copper

For the copper sector, higher royalties were proposed for copper ore, copper concentrates and copper cathodes.

Freeport-McMoRan said it is seeking export approval from the Indonesian government for copper ores that it cannot process due to a fire incident at Freeport Indonesia's Manyar copper smelter at Gresik on Oct. 14, 2024, which stopped production.

No export approval has been granted, but the EDSM on March 5 allowed mineral companies that have declared force majeure on production to export their unprocessed ores, subject to approval.

With a higher tax on copper cathode exports, market participants expect the seller to pay the tax. Indonesia would need to export after two new smelters started running at full capacity, the participants said.

Before the fire, the Manyar smelter was scheduled to hit its full production capacity of 600,000 mt/year of copper cathode by the end of 2024. Additionally, PT Amman Mineral Internasional inaugurated a smelter in September 2024, with an output of 220,000 mt/year of copper cathode.

"Indonesia [was] a net copper [cathode] exporter even before the two smelters [were] put online," another trader said, adding that the new royalty tax would lead to higher costs for smelters.

Indonesia net exported 202,000 mt of copper in 2024.

Platts assessed CIF China clean copper concentrate treatment and refining charges at minus $18.40/mt and minus 1.84 cents/lb, respectively, on March 12, up 10 cents/mt and 0.01 cent/lb from March 11.

Meanwhile, royalties were proposed for the first time for cobalt metal and cobalt as a byproduct of nickel matte production.

Indonesia's proposed royalty rates for minerals (selected)

Source: Ministry of Energy and Mineral Resources