Jakarta, INTI - Fluctuations in global commodity prices have long been a challenge for countries dependent on raw material exports, including Indonesia. Prices for commodities such as nickel, copper, and bauxite are often influenced by unpredictable international market conditions, including geopolitical tensions, changes in trade policies, and economic crises. In response to these challenges, mining downstreaming has emerged as one of the solutions considered capable of reducing dependence on commodity price fluctuations and providing long-term economic stability.
Downstreaming as an Effort to Diversify Products
One of the main benefits of downstreaming is product diversification. Rather than only exporting raw materials, downstreaming allows countries to process their natural resources into higher-value products. For instance, raw nickel can be processed into materials for electric vehicle batteries, which have stable demand in the global market, even when raw nickel prices fluctuate.
According to data from the Central Bureau of Statistics (BPS), the contribution of processed mining products to Indonesia's exports increased by over 25% since the downstreaming policy was introduced in 2014. This indicates that downstreaming not only enhances export value but also provides stable income for the country, regardless of international market conditions.
Reducing Dependence on Raw Material Exports
By focusing on downstreaming, Indonesia can decrease its dependence on raw material exports that are highly volatile in price. For example, in 2020, nickel prices dropped over 20% due to a global economic slowdown caused by the COVID-19 pandemic. However, the downstream industry producing processed products from nickel remained resilient because demand for electric vehicle batteries continued to rise.
Moreover, downstreaming allows Indonesia to exert more control over its supply chain. This gives the country more leverage in international trade negotiations, as Indonesia is not only exporting raw materials but also higher-value semi-finished or finished products.
Is Downstreaming Enough to Face Commodity Price Fluctuations?
Although downstreaming offers many benefits, it is important to note that this policy is not a standalone solution for avoiding global commodity price fluctuations. Prices for raw materials will still be affected by international market dynamics, and raw material-producing countries remain vulnerable to price changes. However, downstreaming provides a better cushion against these fluctuations by creating product and income diversification.
According to a World Bank report, downstreaming can reduce the impact of commodity price fluctuations by up to 40%, especially if raw material-producing countries can build strong and competitive downstream industries in international markets.
Mining downstreaming offers a partial solution to reduce dependence on global commodity price fluctuations. By enhancing the added value of mining products through domestic processing, Indonesia can create more stable income diversification. However, to achieve long-term economic stability, downstreaming must be supported by comprehensive policies, significant investment in infrastructure, and sustainable resource management.
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