Jakarta, IO – The Corruption Eradication Commission (KPK) released shocking information: 5.3 million tons of nickel ore has been illegally exported to China. KPK detected this smuggling practice not based on Indonesian Customs and Excise Directorate General (DJBC) or Statistics Indonesia (BPS) data but the Chinese customs agency. According to KPK, the nickel ore smuggling took place in Chinese ports and was often carried out by falsifying export documents using export code HS 2604 or HS0 2604 for processed nickel or pig iron nickel or the equivalent. This was intended to mislead the customs officers so the goods could be cleared.
DJBE revealed that the practice took place in the Maluku and Sulawesi seaports. This was a major breach which allegedly involved a conspiracy of unscrupulous surveyors, customs officers and supervisory personnel. KPK needs to carry out further investigations by questioning relevant parties to uncover and prosecute the mastermind.
Putting a lid on the practice
KPK has the authority to conduct field investigations, even as far afield as ports in China. During the investigation, the exports of any nickel products, both nickel ore and nickel pig iron, should be suspended. This step is necessary to prevent further state losses, because the practice is carried out in a systematic manner involving domestic smelters and legal nickel producers in Maluku and Sulawesi.
The Indonesian Nickel Miners Association (APNI) Secretary General Meidy Katrin Lengkey said the organization has denounced the behavior of certain nickel producers who do not play by the rules. Meidy said APNI has carried out a physical check on several customs offices and ports in China and found that Indonesian nickel ore has been exported under an HS 2604 declaration.
The Indonesian government has imposed a ban on nickel ore exports, effective from January 2020, as per Energy and Mineral Resources (ESDM) Ministry Regulation 11/2019. The moratorium aims to rejuvenate the downstream industry to create added value to the domestic industry. However, the downstream nickel policy, followed by a ban on iron ore exports, has only benefited illegal exporters and caused state losses.
China, top nickel export destination
Indonesia’s nickel export volume to China tops the chart, hitting 581.66 million tons in the January-November 2022 period which, according to BPS, soared by 1,077.06 percent over the same period the year before. In terms of value, it was worth US$3.87 billion (Rp60.1 trillion), up dramatically by 2,109.85 percent YoY (see Figure 1). Nickel exports to China accounted for 74.29 percent of Indonesia’s total export value of US$5.22 billion in the first 11 months of 2022.
Other major destinations are Japan, which reached US$1.1 billion (21.09 percent), followed by South Korea (US$106.94 million), Malaysia (US$70.67 million) and Norway (US$61.87 million). Singapore comes in sixth with US$1.08 million, followed by India (US$579,870), Hong Kong (US$78,870), Brazil (US$14,670) and the United States (US$5,600).
The following is the volume of Indonesia’s nickel exports to the 10 main destinations (Jan-Nov 2022): China (581,663.70 tons); Japan (71,249.99 tons); South Korea (19,441.78 tons); Malaysia (10,671.50 tons); Norway (4,993.12 tons); Singapore (134.05 tons); India (216.70 tons); Hong Kong (4.95 tons); Brazil (0.01 tons) and the United States (0.09 tons). (FIGURE-1)
State loss potential
Based on KPK data, 5.3 million tons of nickel ore were illegally exported to China from January 2020 to June 2022. State losses are estimated to have reached Rp14.51 trillion. (see FIGURE 2). A detailed volume of these illegal exports is as follows (see FIGURE 3).