Bappebti and APNI Strengthen Nickel Trade Through Indonesian Futures Exchange
Jakarta, January 22, 2024 – The Indonesian Commodity Futures Trading Regulatory Agency (Bappebti) and the Indonesian Nickel Mining Association (APNI) are collaborating to strengthen nickel trade by establishing a domestic nickel futures exchange. This initiative aims to optimize Indonesia’s nickel trade and create an independent nickel price benchmark.
Indonesia, the world’s largest producer and exporter of nickel, currently relies on foreign exchanges for nickel pricing. Bappebti’s studies indicate that nickel is a viable commodity for futures contracts, which aligns with Indonesia’s law on commodity futures trading. The effort intends to establish a national and global price reference for nickel, especially since Indonesia accounts for 55% of the world’s primary nickel production. In 2023, Indonesian nickel production reached 1.8 million tons out of a global total of 3.6 million tons. The majority of the country’s nickel deposits are located in Sulawesi and North Maluku.
Tirta Karma Senjaya, Head of Bappebti, emphasized that “As the world’s largest producer and owner of nickel reserves, Indonesia must optimize its nickel trade to boost national income”.
He added that creating a domestic price reference will support the government’s focus on downstreaming, strengthening the domestic market, increasing exports, and fostering business growth.
Bappebti has engaged in discussions with experts, self-regulatory organizations, and APNI.
Olvy Andrianita, Secretary of Bappebti, mentioned that Bappebti is revising regulations to include nickel as a subject for futures contracts.
Veriyadi, a consultant for Bappebti, noted that nickel’s large trading volume, diverse products like ferronickel, NPI, and nickel matte, and price volatility make it suitable for futures trading. Since 2004, nickel prices have experienced four bubble events, which underscores the need for a more stable and transparent trading mechanism.
Despite the potential benefits, several challenges exist. Establishing a transparent and observable pricing mechanism that accurately reflects the physical commodity is critical. Other challenges include potential price premiums, geopolitical issues, and policy considerations.
According to Meidy Katrin Lengkey, Secretary General of APNI, Indonesia’s 53% share of global nickel production should allow it to be a price setter. Currently, the domestic benchmark price for nickel ore is significantly lower than the international price.
For example, in 2024, the average domestic price for 1.8% grade nickel ore is USD 36/mt, while the international price is USD 63/mt. This price disparity represents a considerable loss for the country.
Furthermore, the need to comply with Environmental, Social, and Governance (ESG) standards in nickel trading, especially concerning battery exports to the EU in 2027, is a major concern.
Indonesia currently has 395 nickel mining permits, with 49 pyrometallurgy and 6 hydrometallurgy processing plants, and 40 smelters under construction. APNI believes that trading nickel on a futures exchange can increase efficiency, transparency, and accountability in the national nickel trading ecosystem.
The proposed futures trading system will facilitate all nickel trading transactions through Indonesian banks, which will strengthen the domestic financial system. Additionally, the futures exchange will help in better monitoring of the nickel supply chain, reducing the risks of illegal mining and transactions. Finally, it will offer risk management tools for businesses to hedge against global price volatility.
