Indonesia’s Radical Export Experiment Upends Its Commodity Trade

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(Bloomberg) — Indonesia’s radical plan to take control of key commodity exports has left the country’s coal miners, palm-oil producers and traders racing to understand details of a policy that throws into upheaval one of the country’s biggest industries.

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Rumors of an unprecedented shake-up began circulating on Tuesday and sent shares in Indonesian miners and palm producers sliding. Traders and producers questioned whether President Prabowo Subianto would take such a step — extreme even for an administration has already sought to centralize state assets into a sovereign-wealth fund which answers to the president.

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Then, during a speech to lawmakers on Wednesday, Prabowo announced that starting with palm oil, coal and ferroalloys, one of the world’s top commodity producers would require all shipments to go through a government-created company. The effort, he said, was intended to curb “under-invoicing and under-accounting” and to have a greater say in price.

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“This is resource nationalism on steroids,” said Tom Price, senior commodities analyst at investment bank Panmure Liberum Ltd. “The policy will eventually retard mining investment in Indonesia. It’s a warning shot for nickel.”

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Southeast Asia’s largest economy has introduced audacious export policies before, banning some metal ores in 2020 and 2023, for example, in order to encourage foreign investment in processing operations. It has occasionally stepped in to protect domestic consumers too — during the last major energy crisis four years ago, Indonesia restricted both coal and palm oil exports.

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Prabowo has also repeatedly taken aim at foreign entities and the country’s wealthy, and has seized millions of hectares of plantations and mining operations since coming to power in 2024.

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But Indonesia is the world’s largest producer and exporter of palm oil, the top seller of thermal coal and a dominant source of nickel, a vital battery material — ensuring the latest step to remake an entire industry comes with global ripple effects.

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“If the exports are not managed properly, we may lose our export market,” said Eddy Martono, chairman of the Indonesian Palm Oil Association, known as Gapki.

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Palm stocks fell on the announcement, with First Resources Ltd. sliding as much as 9.3% in Singapore, while Golden-Agri Resources Ltd. fell to a five-month low. MP Evans Group Plc and AEP Plantations Plc, which both have plantations in the country, fell more than 15%. Buyers of the vegetable oil, used for everything from fuel to ice cream, said the move would mean a restricted and opaque market, encouraging them to look elsewhere.

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Just as large consumers like China periodically assert their clout, major producer nations have also sought to take greater control of their resources. Indonesia has long struggled to turn its natural wealth into sustained economic growth, in part because of trades routed outside the country to cut tax and maximize profit.