Economist: Mineral exchange forms price mechanism through market trust
The establishment of the Mineral and Strategic Commodities Exchange is expected to create price makers, meaning price formation driven by market depth and trust.
Executive Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira assessed that the establishment of the Mineral and Strategic Commodities Exchange can create a stronger price formation mechanism through market depth and trust.
According to him, a mineral exchange plays an important role in building a market ecosystem capable of creating prices based on transaction credibility, rather than merely following prices set by other parties.
“The establishment of the Mineral and Strategic Commodities Exchange is expected to produce price makers, meaning price formation driven by market depth and trust. Price formation gives minerals a higher value,” Bhima said when contacted in Jakarta on Tuesday.
He noted that Indonesia has so far remained in a position as a price taker, because mineral commodity transactions are largely determined through bilateral agreements between producers and buyers.
Bhima also assessed that transparency is an important aspect in establishing a mineral exchange, particularly to guarantee certainty of raw material supply for the development of downstream processing industries.
“Transparency is important in relation to certainty of raw materials for downstream processing. The exchange must be able to provide transparency, including traceability of mining site locations to prevent products from illegal mines entering the market,” he said.
He added that the mineral exchange must also be able to raise environmental standards in order to have credibility amid increasingly stringent global market demands on sustainability.
Furthermore, Bhima said Indonesia’s mineral exchange could adopt international standards such as those applied by the London Metal Exchange to ensure that traded minerals have a clear track record.
Bhima assessed that the success of this exchange depends not only on the trading mechanism, but also on the ability to build market trust through transparency, sustainability standards and quality assurance for Indonesian mineral products.
Previously, President Prabowo Subianto targeted Indonesia to have a Mineral and Strategic Commodities Exchange beginning operations on 1 January 2027.
In delivering the Government’s Introductory Statement on the Bill on the 2027 State Budget and its Financial Note at the MPR building in Jakarta on Friday (14/8), he expressed hope that provisions on the operation of the exchange could be discussed and issued promptly by the House of Representatives (DPR).
“With the support of the DPR, our plan is that on 1 January 2027 we will have our own commodity exchange. We are targeting the provisions on the operation of the Mineral and Strategic Commodities Exchange to be discussed immediately with the DPR and request that they be issued as soon as possible,” said President Prabowo.
President Prabowo said the establishment of the exchange is a further stage of the single-door export policy currently being implemented by the government. The government has also discussed the plan with the Financial Services Authority (OJK).