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Indonesia Plans Higher Mining Royalties

The Energy and Mineral Resources Ministry held a public hearing on Friday (8 May) regarding plans to adjust royalty rates for several mining commodities including:
- copper
- tin
- nickel
- gold
- and silver

Overall, these changes include:
- adjustments to mineral reference price intervals
- and increases in royalty rates for several major commodities

The government plans to submit the proposal to President Prabowo Subianto shortly, with implementation targeted to begin in June 2026 with no retroactive application.

Tin Faces the Largest Royalty Increase
Among all commodities discussed, tin faces the sector with the most significant rate change.

Tin royalty rates are proposed to increase from:
- approximately 3–10%
to:
- approximately 5–20%

Meanwhile, several other changes include:
- Copper concentrate: 7–10% -> 9–13%
- Copper cathode: 4–7% -> 7–10%
- Gold: 7–16% -> 14–20%
- Silver: flat 5% -> 5–8%

For nickel, royalty rates generally remain within the range of 14–19%, although the mineral reference price intervals will be adjusted.

Additionally, the government will also adjust the royalty scheme for cobalt as a derivative product in nickel matte.

Why the Market Usually Reacts Negatively
Historically, news regarding increases in royalty rates is almost always met with negative market reactions in the short term.

This is quite understandable because:
- higher royalties have the potential to compress mining company margins
- increase effective production costs
- and reduce profit sensitivity when commodity prices are high

Looking at the existing proposal and current commodity prices:
- tin is expected to experience the largest royalty increase
- followed by gold and copper
- while the impact on nickel is relatively smaller

The Bigger Concern: More Policies Could Follow
While market focus is currently on royalties, there are actually other factors that also loom over the mining sector.

The government is said to still be discussing:
- the possible implementation of export duties
- and windfall tax schemes

particularly for the sectors of:
- nickel
- and coal

If these additional policies are realised, the pressure on mining sector profitability could be greater than the royalty increase itself.

Volatility May Stay for the Mining Sector
With the combination of:
- higher royalties
- policy uncertainty on additional measures
- and global commodity price dynamics

mining sector share price movements are likely to remain volatile in the short term.

However, as usual, the impact will not be evenly distributed across all companies.

The market is likely to become more selective and begin to differentiate:
- companies with low production costs
- strong business diversification
and the ability to maintain margins amid regulatory changes

The plan to raise royalties shows that the government is beginning to look for additional room to increase government revenue from the natural resources sector.

On the other hand, the market will also watch how balance is maintained between:
- optimising government revenue
and
- the competitiveness of the national mining industry

Because ultimately, the commodity sector moves not only based on global prices but is also heavily influenced by the direction of domestic policy.