The projected victory of Prabowo Subianto in Indonesia's presidential election got a tepid reception from the metals market, as the current defense minister is expected to continue the incumbent's mining policies.

Prabowo claimed victory in the Feb. 14 election after unofficial quick counts by independent pollsters showed he won over 50% of the vote. The official result will be announced within 35 days, and the new president will take office in October 2024.

Metal investors are waiting to hear specific mining policies from Prabowo's administration. Prabowo has vowed to continue the flagship policies of President Joko Widodo, known as Jokowi. These include creating an electric vehicle supply chain and "downstreaming" policies that restrict mineral exports to develop processing industries.

"There may be a period between now and the end of 2024 during which foreign investors take a wait-and-see approach to try and understand more about Prabowo's industrial policies," said Richard Bullock, portfolio manager of the fixed income team at Newton Investment Management. "Beyond the presidential transition period, however, I'd expect it to be very much business as usual for multinational companies looking to invest in Indonesia as the structural features of the economy remain very attractive."

Indonesia's export ban on nickel, a key battery metal, in 2020 has successfully lured foreign companies, mainly from China, to invest and bring technology to build processing industries. Indonesia's foreign direct investment in the metals and mining sectors rose 180% to $16.5 billion in 2023 from 2019, according to the Indonesia Investment Coordinating Board. The country is expected to account for 45.5% of global primary nickel production by 2028, according to S&P Global Commodity Insights.

However, as a former army lieutenant general and strongman, Prabowo is considered more populist, nationalistic and conservative than his two opponents, Anies Baswedan and Ganjar Pranowo, which could bring higher risks around environmental, social and governance issues, foreign policy, and fiscal populism, according to Bullock. "Given his character background, there is a greater chance that Prabowo could pursue unilateral decision-making rather than a more consultive approach," Bullock said.

"Indonesia's foreign policy has been one of non-alignment with great powers, and I would not expect this to change under Prabowo. However, as Indonesia's influence on the world stage increases due to its economic power, there will be more scope for Prabowo to assert foreign policy views," Bullock said.

Embracing resource nationalism

Prabowo supports Jokowi's resource nationalism policies and wants to replicate nickel's success for other minerals. The Jokowi government banned unprocessed bauxite in June 2023, with plans to restrict exports of more minerals, including tin, cobalt and copper. Indonesia holds 7.9% of global reserves and resources of tin, 7.2% of cobalt, 2.8% of copper and 1% of bauxite, compared with its 18.8% global share of nickel, according to S&P Global Market Intelligence data.

How a Prabowo presidency would impact tin remains to be seen, said Jeremy Pearce, an analyst at the International Tin Association.

Unlike nickel and other unprocessed minerals, Indonesia has already banned tin ore exports since 2014 but has exported refined tin. "Downstreaming policies focused on tin metal ingots would require a whole range of tin-using industries including intermediates such as solders and chemicals, which is much more complex," Pearce said. "Extensive work has been done by the government and the tin industry to scope this out, but so far no outcome."

Indonesia represented 19% of global refined tin production in 2023 and 36% of ex-China output, according to the association.