Electric Vehicles, Batteries, Nickel:
Navigating Core Licensing for Smelter Plant Business

The industry has grown rapidly ever since, especially when electronic vehicle owners are given dozens of benefits such as the freedom to not be restricted by Odd-Even License Plate Policy on the road. This creates a domino-effect to not only the electronic vehicle companies, but also battery producing companies.

Lithium-ion batteries are essential for electronic vehicles as their source of power. This is where Indonesia plays a great role: we are rich in nickel resource, the jewel component of making good quality lithium-ion batteries. The demand rise for making lithium-ion batteries also helped nickel mining industries and nickel smelting plants to flourish, attracting domestic and international investors to take part in said businesses.

However, when it comes to smelting plants, foreign investors interested in establishing one need to pay attention to the licensing issues. In the recent years, the Indonesian government has been strict in regulating nickel mining and product sales, hence there has been a regulatory amendment in relation to the above specifically affecting companies conducting activities in the smelting sector.

In the past, smelting companies were closely related to mining activity. They used to be regulated through Law No. 4 of 2009 regarding Mineral and Coal Mining as amended by Law No. 3 of 2020 regarding Amendment of Mineral and Coal Mining and as amended by Law No. 6 of 2023 regarding The Stipulation of the Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation into Law (“Mining Law”). The Mining Law classifies mining licenses including buat not limited to the following:

1. Wilayah Izin Usaha Pertambangan
2. Exploration IUP (Izin Usaha Pertambangan Eksplorasi/IUP Eksplorasi)
3. Operation Production IUP (Izin Usaha Pertambangan Operasi Produksi/IUP-OP)

The previous Mining Law (Law No. 4/2009) also mentioned the existence of two special IUP-OP types called IUP-OP Specifically for Processing and Refining (IUP-OPK Pengolahan dan Pemurnian) and IUP-OP Specifically for Transportation and Sales (IUP-OPK Penjualan dan Pengangkutan). Although it is not explicitly regulaty, it could be interpreted that smelter plants conducting processing and/or refining of minerals including nickel should have this special license.

Law No. 3 of 2020 then changed this stipulation by mandating IUP-OP Specifically for Processing and Refining holders to migrate their license into an Izin Usaha Industri (IUI) within one (1) year since the law becomes valid through Article 169C. This shows that there is a change of authority who regulates smelting activities from the Ministry of Energy and Mineral Resources to the Ministry of Industries. We can also conclude that the Ministry of Energy and Mineral Resources oversees the mining part whereas factory or industrial activities are the responsibilities of the Ministry of Industry.

Today, IUP-OP Specifically for Processing and Refining is no longer issued, and smelting companies may apply for an IUI instead. It is also important to note that license migration is mandated by law, so it is best for companies still holding a not-yet expired IUP-OP Specifically for Processing and Refining to quickly apply for an IUI if they wish to continue their smelting plant operations.

Disclaimer:
The information contained in this article is general and should not be considered as legal advice or any other professional advice. Please consult with professional advisors for advice concerning these specific matters before making any decisions.