How COVID-19 Affects Mining Activities

Due to the covid-19 pandemic, Indonesia’s mining production is far from expectations, except for refined nickel and coal, which exceeded output plans. 

Based on the data from the Ministry of Energy and Mineral Resources, the production of copper, gold, silver and tin only reached 75-98 percent of their respective targets. Meanwhile, the production of refined coal and nickel reached 102 percent and 137 percent, respectively. Based on these, the mining industry’s performance decreased by about 20 percent due to disrupted supply chains. Suppliers must comply with health protocol regulations in an effort to contain the COVID-19 pandemic. 

Overall, As miners cut their spending on smelter construction and working capital, Indonesia’s mining investment in 2020 reached US $ 4.02 billion, which is 38.3 percent lower than the initial target of that year of US $ 7.75 billion.

The Director General of the Energy Ministry’s Mining, Ridwan Djamaluddin, said that Indonesia had 19 metal smelters in operation as of 2020, most of which were nickel smelters, instead of a targeted 21 smelters. And also said that coal consumption in Indonesia in 2020 will reach 132 million tons, 4.3 percent lower than the usual annual target and only 85 percent of the annual target, in line with the decline in PLN production. Despite the decline, nontax state revenue (PNBP) from the mining industry exceeded the target by 110.15 percent to IDR 34.6 Trillion (52.46 Billion) in 2020 based on ministry data.

Therefore mining is a major contributor to Indonesia’s non-tax state revenue. The ministry estimates that by 2021 mining investment will increase by 49 percent year-on-year to $ 5.98 percent billion as companies catch up with their smelter construction plans. The ministry also estimates that mining state revenues will increase by 13 percent yoy to IDR 39.1 trillion this year in line with the recovery of first operations from the Covid-19 pandemic. 

To capture such investments, the ministry aims to pass four key regulations this year, namely a government regulation (PP) on the mining business, mining concessions and land reclamation as well as a presidential regulation (perpres) on regional administrations’ role in regulating the industry. And also the ministry was expects coal miners to continue developing downstream facilities, particularly coal gasification plants, to create a long-term domestic market for Indonesian coal as global demand shifts away from the dirtiest fossil fuel.



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