President Joko Widodo announced that Indonesia will impose a bauxite export ban starting from June 2023, in a move to shore up the domestic processing of its mineral resources. In this article, we explain what the bauxite export ban is, why Indonesia introduces the bauxite export ban, and what the potential impacts are.
What is the bauxite export ban?
Bauxite is the best and only material for large-scale production of aluminum, a metal that is widely used for aircraft construction, building materials, consumer durables, electronic conductors, and chemical and food-processing equipment.
Indonesia is the world’s sixth-largest bauxite producer and has the fifth-largest reserves, according to a US Geological Survey.
According to President Widodo’s announcement, starting from June 2023, the government will impose a ban on exports of bauxite ore. Moreover, exports of bleached bauxite will also be banned.
Why does Indonesia introduce the bauxite export ban?
Indonesia introduces the bauxite ban to replicate its success in nickel processing after banning the export of raw nickel material in January 2020.
According to Indonesian Chamber of Commerce and Industry chairman Arsjad Rasjid, the export value of the country’s Nickel export reached US$20.9 billion in 2021 and is expected to exceed US$30 billion in 2022, from only US$1.1 billion at the end of 2014. Arsjad believes the export ban can benefit Indonesia’s economy.
Now through the bauxite ban, President Widodo hopes more value can be added domestically, more jobs can be created, more foreign exchange reserves can be increased, and more equitable economic growth can be achieved.
“The government will continue to consistently carry out domestic down streaming so that added value is enjoyed domestically for the progress and welfare of the people,” President Widodo wrote on Facebook on December 21, 2022.
What are the impacts of the bauxite export ban?
Economic growth of Indonesia
As introduced above, the Indonesian government believes that the export ban can benefit its economy by adding more value locally. Especially for regions where the bauxite reserves are located and where the bauxite industrial chain will be developed, huge economic growth could be expected.
Development of Indonesia’s electronic vehicles industry
Besides, the bauxite ban might be a necessary step for Indonesia to build an ecosystem for electric vehicles.
Similar to nickel, bauxite is also a key material in the production of electric vehicles—nickel is used for making lithium batteries, while aluminum made from bauxite is the material to build lightweight and strong electric vehicles.
It’s reported that Indonesia is finalizing plans to subsidize electric vehicle sales and President Widodo has ordered government officials to use electric vehicles for official purposes.
Impact on China
Indonesia has been the third largest bauxite supplier to China in recent years, behind Guinea and Australia. According to Indonesia’s customs data, China imported 17.8 million tons of bauxite from Indonesia in 2021, accounting for about 15 percent of its total imports.
However, China’s reliance on Indonesia for bauxite export has been declining.
Before 2014, Indonesia was China’s largest bauxite supplier. 80 percent to 90 percent of China’s imports came from Indonesia, and the high concentration of imports made the import volume of bauxite easy to be affected by Indonesian trade policies. In 2012 and 2014, the import volume of bauxite shrank significantly under the export ban on Indonesian bauxite. Since then, Australia and Guinea have become the largest two suppliers of bauxite to China. In addition, China has expanded its import scope to Malaysia, India, Brazil, Ghana, and other countries.
Given this situation, Indonesia’s export ban on bauxite ore may only have a limited impact on China’s aluminum industry.
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