DEN says lower royalty rates at smelters spur investment

Jakarta - The National Economic Council (DEN) has stated that the policy of applying lower royalty rates on refined products at smelters is one of the government’s instruments to encourage investment in mineral downstreaming, particularly the nickel industry.

DEN Mining and Mineral Expert Nataneil Adhynegara Horansil said during a discussion on Nickel Management Reform to Encourage Green Industry Growth in Jakarta on Thursday that, in terms of state revenue calculations, royalties levied on nickel ore provide greater value compared with royalties on refined products.

However, the government needs to consider the long-term objective of increasing investment and creating added value through downstreaming.

“If our goal is to obtain maximum royalty value, then we should collect royalties at the mine so that revenue is maximised. But we also want downstreaming, so that is why the government applies lower royalty rates at smelters, to trigger investment in downstreaming,” said Nataneil.

He explained that the current nickel royalty rate for ore ranges from 14 percent to 19 percent, depending on the Mineral Reference Price (HMA). Meanwhile, the royalty rate for refined products is relatively lower, in the range of 5 to 7 percent depending on the HMA, in accordance with Government Regulation Number 19 of 2025.

He said that with the same nickel content, royalty payments on nickel ore generate greater revenue compared with levies on processed products.

For ferronickel, for example, the royalty value paid on ore reaches 176 US dollars, whereas when calculated on the ferronickel product it is only around 128 US dollars. Meanwhile for nickel matte, the royalty value on ore reaches 686 US dollars, while on the nickel matte product it is around 365 US dollars.

“This means the royalty paid by miners is greater than the royalty paid by smelters. So we should not mistakenly think that royalties should be paid only at smelters, not at mines,” he said.

In 2024, nickel royalty revenue was recorded at around Rp11.63 trillion, a figure that increased to around Rp19 trillion in 2025.