At the beginning of this year, the Indonesian government said that it was studying the progressive tax on nickel products.



In the case of the World Trade Organization (WTO) EU v. Indonesia on the prohibition of nickel ore export (hereinafter referred to as "DS592"), Indonesia lost the case.



Indonesia is the worlds largest producer of nickel ore, with the largest known nickel reserves in the world. The non-ferrous metal market has always been sensitive to the policies of the country. Recently, due to the news that Indonesia may impose a tax on the export of nickel products, in the past November, London Metal Exchange (LME) nickel futures (hereinafter referred to as "Lunni") rose 22.4% monthly, with a fluctuation of nearly 8000 dollars/ton. At present, the price of Lunni is about 26000 dollars/ton.



Two years ago, Indonesia issued a ban on nickel ore export, requiring a comprehensive ban on nickel ore export from January 2020; At the same time, relevant processing requirements are issued for nickel ores, and enterprises need to process or purify raw materials in Indonesia before exporting.



The EU is dissatisfied with the above issues and has filed a lawsuit in the WTO. The results of the expert panel decision published by the WTO support the EUs claims in these two areas. According to the information obtained from authoritative channels by the First Finance and Economics reporter, the expert group supported all EU prosecutions, that is, Indonesias ban on the export of nickel ores and its request for all nickel ores to be processed (purified or refined) in Indonesia did not meet the requirements of the Tariff and Trade Agreement (GATT).



According to the First Finance reporter, the report should be approved by the WTO dispute settlement mechanism within 20-60 days after the expert panel report is issued, unless the dispute settlement mechanism decides by consensus not to approve the report, or any party (involved in the case) decides to appeal.

At present, according to foreign media reports, Indonesian President Joko has said at a meeting that he would appeal.

Why does WTO support all demands of EU



The European Union believes that Indonesias ban on nickel ore exports and measures requiring domestic processing are illegitimate, illegally restricting the EUs access to raw materials for stainless steel production, and distorting the global ore market price. In November 2019, the EU contacted Indonesia to try to resolve the dispute. After no solution was reached through consultation, the WTO, at the request of the EU, established a relevant expert group in January 2021 to hear the case (DS592).



This time, the WTO made it clear that Indonesias export ban on nickel ore and domestic processing requirements violated WTO rules.



According to the First Financial reporter, the WTO has given two important explanations. First of all, the WTO expert group determined that Indonesias export ban and domestic processing requirements for nickel ores used to produce stainless steel did not comply with the provisions of the WTO GATT in 1994 on "export ban and restrictions". Secondly, the expert group confirmed that Indonesias measures did not comply with the exemption from the prohibitions or restrictions provisionally applied in GATT to prevent or mitigate serious shortages of products vital to Indonesia.



"The Panel recommends that Indonesia take measures consistent with its obligations." This is stated in the award.



Indonesia may also introduce new taxes



"Although we lost in the WTO on the nickel issue... It doesnt matter. I have told the (relevant) minister to appeal." Joko said.



"We want to be a developed country, and we want to create jobs. If we step back because we are afraid of being prosecuted, we will not be a developed country." Zoco said.



The WTO expert panel is part of the WTO dispute settlement body. At the request of one party to the dispute, the dispute settlement body may establish an expert panel. If either party appeals, the case may enter the appeal body, but the appeal is limited to the relevant legal issues in the expert panel report and the legal interpretation detailed by the expert panel.



The Appellate Body may maintain, modify or revoke the Panels legal findings and conclusions, and once the Appellate Bodys report is adopted by the DSB, the parties to the dispute must unconditionally accept it. However, the embarrassing problem at present is that the appeal body of the WTO has been suspended, so the future direction of the case is not clear.



At the same time, Zoco also said that it would stop exporting other unprocessed minerals, such as bauxite. "Look for investors and let investment go there, just like nickel, it has added value." He said.



Before banning ore export to attract foreign investors to develop nickel smelters and downstream industries in Indonesia, Indonesia was the largest nickel exporter in the world.



In the past two decades, the nickel market has grown due to the rapid growth of stainless steel demand. At the same time, as nickel is used to produce lithium-ion batteries, it is expected that the demand for nickel in the world will continue to increase. Lithium ion batteries are an important part of electric vehicles and fixed energy storage systems.



Since the beginning of 2022, the Indonesian government has revealed that it is studying the progressive tax on nickel products. Recently, foreign media reported that the policy will be implemented from January 2023, which triggered a monthly increase of 22.4% for LME Luni.



However, the latest news shows that no final agreement has been reached at the domestic nickel iron tariff meeting in Indonesia, and the progressive export tax policy may need to be extended for two years.



It is reported that what the Indonesian government is discussing is the possibility of imposing export tax on nickel products with nickel content less than 70% to continue to promote the growth of its domestic processing industry. Currently, the nickel content of nickel products exported by Indonesia is 30% to 40%.



According to Chinese customs data, from January to October 2022, China will import 2.267 million tons of Indonesian nickel and its products.