ESDM: Indonesian Nickel Trade Must Be On FOB Basis

The Ministry of Energy and Mineral Resources of Indonesia (ESDM) has issued circular No. 3.E/MB.01/DJB/2022 concerning the obligatory Board basis (FOB) for the sale and purchase of nickel ore free of charge. This Circular letter was prepared in Jakarta on 12 December 2022 and signed by M. Idris F. Sihite, Director General, Department of Minerals and Coal, Ministry of Energy and Mineral Resources.

The circular was first issued to directors of business entities holding a Mining Business Licence (IUP) for the Production and Operation Phase and a special IUP for the nickel Commodity Production and Operation phase.

第二,bu的董事siness entities that hold licences to process and/or refine nickel commodities.

3. Director of a surveyor institution who is appointed to be a surveyor for the analysis and verification of the quantity and quality of mineral sales.

The Ministry of Energy and Mineral Resources has communicated the following in order to increase the national revenue of the mining and coal sub-industries in the nickel ore trade:

1 month after the promulgation of this Circular letter:

1.a. Holding IUP during the metal mineral production and operation phase of producing nickel ore and IUPK during the metal mineral production and operation activity phase of producing nickel ore must sell the produced nickel ore on a FOB basis, including the HPM of the reference nickel ore sold to related parties as the lower limit for determining the sales price and calculating the obligation to pay production expenses.

b. Other parties refining nickel ore whose raw materials come from the IUP holder are required to purchase nickel ore on a FOB basis with reference to nickel ore HPM as the lower limit for determining the purchase price during the metal mineral production and operation activities phase of nickel commodity and IUPK metal mineral production and operation activities.

2. IUP Holders in the Production and Operation phase of Metal Minerals and IUPK holders in the Production and Operation phase of Metal Minerals shall immediately make adjustments to the sales contracts agreed upon before the entry into force of this Circular and submit copies to the Director-General of Mines and Coal through the Director of Mineral Exploration and Development within 1 month of the date set forth in this Circular.

3. Nickel commodities held by IUP in the Metal Minerals Production and Operation phase and IUPK Metal Minerals Production and Operation phase without a copy of the 2nd Sales Contract Adjustment document are not eligible to conduct the Sales Realization Online Monitoring System (MOMS) application on Minerba.

4. The inspector appointed to perform the inspection of the quantity and quality analysis of the sale of mineral products shall be responsible for:

a. Verification of nickel ore sales transactions that must be conducted on a FOB basis;

b. Verify that the sale price is in accordance with the HPM of nickel ore determined by law.

5. In case nickel ore trading violates the provisions of this Circular Letter, it is prohibited to conduct quantitative and quality analysis and verification of mineral sales, and the surveyor shall issue the verification result report (LHV).

6. Any inspector for the analysis and verification of the quantity and quality of the sale of mineral products who violates the provisions of Paragraph 4 and Paragraph 5 of this Article shall be given administrative sanctions in accordance with the provisions of laws and regulations.

This circular letter has been copied to the Minister of the Ministry of Energy and Mineral Resources, the Secretary General of the Ministry of Energy and Mineral Resources and the Inspector General of the Ministry of Energy and Mineral Resources.

In response, nickel industry participants responded:

为了应对APNI发行的通函Secretary-General Meidy Katrin Lengkey regarding the obligation to buy and sell nickel ore on a FOB basis, he stated that nickel mining entrepreneurs would comply with the provisions of these circulations.

According to Meidy Katrin Lengkey, APNI has been striving to achieve such firmness in nickel ore buying and selling transactions on a FOB basis for mining enterprise participants and nickel ore refining and processing plants.

He explained that the regulations of the Minister of Energy and Mineral Resources, No. 11 2020, provide for the sale of nickel ore on a FOB basis. But in practice, smelters have implemented cost insurance and a CIF basis, so nickel miners have to pay extra to transport nickel ore to barges.

In addition to having to pay the state PNBP, or 10% royalty and 1.5% PPh, barges are charged $6 - $8 for nickel ore transport services.

As Meidy Katrin Lengkey said, APNI welcomes the issuance of this circular letter by the Ministry of Energy and Mineral Resources. APNI has also secured government approval for nickel ore deals on a FOB basis. It is hoped that the plant or smelter will comply with this regulation so that there will be no more conflict between the nickel miner and the plant or smelter.