The Global Significance of Indonesia’s Commodities

July 29 2020 | AtoZ Markets – We’re set to see a significant shift in the balance of economic power over the course of the next 30 years, with the vast and bountiful region of Indonesia expected to become the world’s fourth-largest economy by 2050 with a total GDP of $10.502 trillion.

The region took a significant step to achieving this goal recently too, with state-owned mining company MIND ID planning to buy a 20% stake in one of the nation’s leading nickel mining firms PT Vale Indonesia.

This is expected to further strengthen Indonesia’s grip on domestic mineral resources, which is central to the region’s medium and long-term growth. But what is the global significance of Indonesia’s commodities in the current socio-economic climate and beyond?

Indonesia and Nickel – A Look at the Commodities Market

The recent deal involving MIND ID was completed towards the end of last week, with the firm having signed a deal worth an estimated Rp 5.52 trillion ($392 million).

This is a symbolic and significant investment in the future, with the global demand for nickel continuing to rise year-on-year. It was estimated that demand increased by more than 9% during 2017, for example, during which time supply has simultaneously decreased by 2%.

Of course, Indonesia has been quick to capitalize on this imbalance between supply and demand, in a bid to claim a larger share of the market and secure its economy in the wake of the Covid-19 outbreak.

The country is already the largest producer of raw nickel in the world, with an annual output of around 400,000 metric tons.

An Important Strategic Move – But Why is This the Case?

 The deal is certainly a timely one given the state of the nickel market, while it also comes after a period of relative inactivity in the mining sector during the Covid-19 outbreak.

This diminished the region’s capacity for production and caused a quarterly decline in demand, although it’s expected that this trend will reverse completely during the second half of 2020.

In fact, it’s expected that the global demand for key commodities such as oil, gas, and nickel will soar during this period, potentially increasing their value and the respective currencies of key suppliers.

However, there are also long-term global production trends that will negate the use of fossil fuels in the future, with the rise of battery-powered electric vehicles (there are now more than three million of these in the world) driving sustained demand for nickel and innovative battery solutions.

With the demand for nickel expected to remain consistently high over the course of the next 30 years and beyond, the global significance of Indonesia and its commodities has arguably never been more relevant.

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