Indonesia’s mining industry has long been key to the global supply of nickel, coal and cobalt. It now finds itself under attack as the government is moving forward with controversial plans to introduce a new licensing regime for mining companies. Unlike under existing law, this reform would require these companies to reapply for their operation permit each year, beginning in 2026. This is a big deal compared to the current three-year permit length. Industry leaders have shared their profound worries that these proposed changes could severely impact global supplies for critical minerals.
Vale Indonesia, one of the largest operators in the area, operates a nickel mine on the island of South Sulawesi. At the heart of the company’s mining operations is an enormous open-pit mine. It has an enormous impact on Indonesia’s mineral production. Vale’s facility is emblematic of the broader Indonesian mining landscape. Nickel is crucial for enabling technologies for battery production and others.
Indonesia’s central government took a dramatic turn with their reform proposals that put mining executives on edge. They contend that the new annual reapplication process will induce unpredictability and logistical challenges. They claim that this change has a major impact on their business models. Beyond human rights, it jeopardizes the stability of global supply chains, which rely so heavily on Indonesian resources.
Key industry stakeholders have raised their concerns about the impact these changes could have. Furthermore, they contend that the disruption would extend well beyond their local operations. It could have broader consequences for international markets that are dependent on Indonesian nickel, coal, and cobalt. Indonesia is currently among the top three suppliers of each of these minerals. Any disruption to its supply can cause serious consequences for industries all over the world.
The status quo allows large companies to retain their permits to operate for up to three years. This stability helps foster long term planning and promote investment. The addition of an annual reapplication process introduces a lobbying wildcard. Executives are concerned that this will lead to more delays and increase the already high cost of doing business.
As the UK government continues to aggressively pursue its reform agenda, industry players are already beating the drum for a more robust discussion to air their concerns. As ever, they stress the need for a carefully calibrated approach. This way, they can guarantee regulatory compliance while not putting Indonesia’s reputation in the global mining industry at stake.