Trade tensions brew between Indonesia, EU over nickel export ban

Trade tensions are heating up between Indonesia and the European Union (EU) after the latter complained to the World Trade Organization (WTO) about the Southeast Asian country’s alleged illegal subsidies and ban on nickel ore products.

The EU on November 22 notified the WTO over Indonesia’s nickel ore ban, saying it “goes against the rules.”

The EU said it aimed to protect European businesses engaged in steel manufacturing, who would risk losing a major supplier of raw nickel over Indonesia’s ban once the ban takes into effect in January next year.

Nickel ore is a primary ingredient in producing stainless steel.

Hasan Kleib, Indonesian ambassador to the United Nations and the WTO, confirmed that the EU ambassador in Geneva notified his office of the concern and requested for a consultation.

Indonesia has until 10 days to reply to the request, and 30 days for the consultation. Once it lapse, the bloc threatened to open a dispute panel.

While waiting for the Indonesian government’s reply, Kleib said that Indonesia’s representative in Geneva will accommodate the bloc’s invitation for the consultation in an agreed place, time, and format.

“The consultation is a first step toward a dispute resolution at the WTO,” Kleib was quoted as saying.

Indonesia’s Energy and Mineral Resources Ministry introduced the nickel ban in a bid to push local miners to refine the raw ore locally and export higher-value commodities.

United Overseas Bank, a Singapore-based lender, said in a report that Indonesia is expected to produce 71.2 million tons of nickel, more than double its current capacity of 32.7 million as of 2018.

Some 31 smelters are expected to be operational by 2021 to produce the increased capacity.

Indonesia is the world’s largest nickel producer, with one-fourth contribution of  the world’s nickel supply last year.

Its announcement to ban nickel ore export shocked foreign manufacturers such as China, Japan, and Europe.

“The restrictions unfairly limit access by EU producers to raw materials for steel production, notably nickel, as well as scrap, coal and coke, iron ore and chromium,” the European Commission said in its statement.

“The EU is also challenging subsidies that encourage the use of local content by Indonesian producers and give preference to domestic over imported goods, which goes against WTO rules,” it added.

Subsidies included import duty exemption scheme that complements the import of machinery, goods and other material for production processes in newly established or modernizing factories, conditional upon the use of at least 30 percent of locally made components.