Indonesia has enjoyed a number of commodities booms in the past few decades, from a sugar boom, to a rubber boom, and an oil boom, with the most recent the coal and CPO booms. Although the performance of crude palm oil and coal was very good, Indonesia is also enjoying the coming of the nickel boom. While Indonesia has enjoyed the rise of basic nickel products such as nickel pig iron, ferronickel, and stainless steel, the country is now anticipating the rise of new demand for nickel from the electric vehicle (EV) industry.
In that context, the Indonesian government welcomed the start of commercial production from an Indonesian joint venture company (with Indonesian and Chinese companies) by the name of Halmahera Persada Lygend on June 23, 2021. The company has produced MHP (mixed hydroxide precipitates) at its HPAL (high-pressure acid leaching) facility located in the Molluccas Islands. MHP is the main ingredient of the nickel-based battery for electric vehicles.
With that background, the trade balance in May 2021 reported by the Central Board of Statistics displayed its largest surplus this year, at $2,360.5 million. The total trade surplus for the first five months of 2021 is $10,168.7 million. Exports for May reached $16,595 million while imports reached $14,234.5 million. Cumulative exports from January-May 2021 reached $83,990 million while cumulative imports for the same period were $73,821.3 million. The trade balance showed that the level of exports has expanded from its pre-Covid level.
One of the main factors driving the trade surplus was the turning point in the export and import of iron and steel products, which flipped from a significant deficit in 2019 to a significant surplus in 2020, with this continuing and, in fact, increasing further in 2021. Looking into more detail, the rise of the trade balance surplus was due to the rise of nickel-related products such as nickel pig iron, ferro nickels as well as stainless steel. With the commencement of the first HPAL facility in the country, Indonesia will see a rise in exports from the nickel-based products that will contribute to help the rise of the EV industry.
The Central Board of Statistics also reported the Consumer Price Index for May 2021, which resulted in inflation of 0.32%. With that monthly inflation, Y/Y inflation in May reached 1.68%, a level below the target inflation corridor. Given the level of Y/Y inflation, Bank Indonesia decided to keep the benchmark interest rate constant at 3.50% at its Monetary Policy Meeting in June 2021. This policy, together with other measures by the Central Bank, has succeeded in strengthening market sentiment on Indonesia.
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