The impact on downstream policy implementation for mineral export products in Indonesia: marine transportation point of view

Indonesia is a country with abundant natural resources, particularly for metal mineral mining. In 2020, Indonesia is recorded to have approximately 1.2 billion tons of bauxite ore reserves, which made Indonesia the 6th largest owner of bauxite reserves in the world. Apart from bauxite, around 52% or 72 million tonnes of world nickel reserves are also located in Indonesia. However, most of the bauxite and nickel mining production have been exported in the form of ore or concentrate, which has a much lower selling value compared to the processed products. Therefore, the Indonesian government imposed a ban on the export of unprocessed minerals through Law Number 3 of 2020. The export ban is intended for mineral mining products, especially bauxite and nickel, to be processed first into semi-finished goods or finished goods, to provide added value in terms of foreign exchange for Indonesia. This study aims to determine the impact on the implementation of the downstream program, especially for nickel mineral product from marine transportation point of view. The method used in this study is optimizing non-linear programming to determine the type and number of fleets needed to transport nickel from the mine site to the smelter and its processed products from the smelter to the importing country by considering the minimum unit transport costs. The output of this research is the configuration of the sea transport fleet required for the implementation of the mineral product downstream program as well as the potential added value of transporting those processed products into the Indonesia‘s balance of payment.


Introduction
Indonesia is a country with abundant natural resources, one of which is metal mineral mining.These mineral reserves include nickel and bauxite [1].This wealth then provides great potential for Indonesia, especially to create added value for the economy if it can be processed domestically.Wealth in nickel and bauxite mining products can be seen in the growth in the production of these minerals each year, which has increased by an average of 40.3% and 196%, respectively [2].
Growth in the mining sector in Indonesia, especially bauxite itself, has not succeeded in maximizing the country's foreign exchange.This is because the results of the mining sector are directly exported without being processed into work-in-processed goods or finished goods which causes the results from these mines to be less than optimal.Therefore, in 2020, the Indonesian government plans to impose a 1298 (2024) 012018 IOP Publishing doi:10.1088/1755-1315/1298/1/012018 2 ban on the export of unrefined minerals such as concentrate through the Law on Mineral and Coal Mining which includes bauxite.The export ban applies to Law Number 3 of 2020 where the enforcement of this law will be implemented 3 years after stipulating, which is on June 10 th , 2023 [3].The export ban is intended for mineral mining products, especially bauxite, to be processed first into semi-finished goods or finished goods, to provide added value and optimize the Indonesia's Balance of Payment, in terms of export product value.The existence of a ban on the export of mineral mining products has positive and negative impacts on various sectors where one of the positive impacts is the increase in the selling value of mineral mining products, especially bauxite and nickel [4].As for the negative impact, the number of smelters in Indonesia is currently unable to meet the production of nickel ore or bauxite, so there will be potential for the construction of new smelters.Therefore, the purpose of this study is to plan the optimum marine transportation particularly for nickel from the mine site to the smelter, then continue to the importing country by considering the minimum total transportation costs.In addition, the existence of a downstream program will have an impact on the Indonesia's Balance of Payment, especially on exports of goods (minerals) related to work-in-process commodity prices which are more expensive than raw materials so that there will be potential for additional foreign exchange from exports of these goods.

Literature review
Downstream policy is associated with the concept of added value and product competitiveness.The farther a product is produced from industrial activities the higher the value or price.In industrial practice the concept of added value is defined as the difference or comparison between the selling value of the product produced and the costs required to create the product in equivalent units of volume or weight.[5].
There has been previous research on sea transportation planning due to the implementation of downstream policy, but it only focused on copper mining products.In 2022, Achmadi et al. showed that the results of the study include the optimum transportation scenario from the mine site to the smelter, then continue from the smelter to the importing country, considering the fleet ownership, whether the ship is new-building ship, second-hand ship, or charter ship [6].However, this study focuses more on the magnitude of the impact of the downstream policy on Indonesia's Balance of Payment, in terms of transportation and added value of goods.Moreover, this study concentrates more on the magnitude of the impact of the downstream program on Indonesia's trade balance, in terms of transportation and added value of goods.The total amount of exports for nickel will be the main factor in determining the sea transportation model and calculating the amount of potential addition to the Indonesia's foreign exchange after being processed in Indonesian smelters.
In the Indonesia's Balance of Payment, there are two transaction records, namely: (1) current account and (2) capital and financial transactions [7].The current account includes the recording of: In this study, the scope of the discussion of the balance of payments is limited to measuring the impact of implementing a downstream program for export mineral products, particularly for nickel, on the amount of the current account, in terms of goods (non-oil and gas) and services, particularly sea transportation services.

Methodology
There are two methodology approaches to determine the optimum shipment of nickel after implementing a downstream program, as follows: The calculation of transportation costs is carried out to find out how much transportation costs are in exporting nickel after the implementation of the downstream policy.Non-linear programming was used to define the optimum ship including type, size and number of ship required by considering the minimum transportation cost.
a. Shipment form mine site to smelter The first analysis of fleet planning is the calculation of needs and determining the type of sea transportation to fulfil nickel shipments from mine site to ferronickel smelter.In this shipment, the various types of ship used in the calculation are four bulk carriers and four tug-barges.The combined route from the port of origin to the port of destination.By using a decision variable in the form of the number of ship frequencies in a year (nfabc), the parameters set in this optimization model are as follows: Subject to: Where: ZC : minimum transportation cost (USD/year) a : type of ship selected b : port of origin node c : port of destination node n : frequency FC : fixed cost (USD/year) VC: variable cost (USD/year) K : number of ships required (unit) Qbc: number of cargoes carried from b to c (ton/year) Dc : total demand in c (ton/year) Sb : total supply in b (ton/year) Fabc : number of frequencies used of ship from b to c (roundtrip/year) Fabcmax : maximum frequency required of ship to deliver cargo from b to c (roundtrip/year) Equation ( 2) is a constraint to limit the amount of cargo transported by ships from the mine not exceeding the volume of production.For equation (3), this constraint limits the amount of cargo that enters the smelter not less or fulfils the smelter's demand.Equation ( 4) is the selected shipping frequency limit not to exceed the shipping frequency from the calculation results.b.Shipment from smelter to manufacturer In this shipping process, the various types of sea transportation used are general cargo.For shipping routes, there are two options, namely direct shipping from the ferronickel smelter to the stainless-steel factory, while the second option is to pass through the hub port first.Moreover, the ferronickel carried from the smelter is sent and collected first to the hub port using six small general cargo ships (DWT 1,000-7,000), then from the hub port it is sent to the nearest port by the stainless-steel factory using five ships of general cargo (DWT 11,000-27,000).There are two hub ports considered in this study, namely the Port of Makassar and the Port of Surabaya.The hub port in Makassar is chosen because the location is close to the ferronickel smelters, most of which are located on Sulawesi and North Maluku.On the other hand, the Port of Surabaya is selected because of the current conditions, shipments of ferronickel for export usually transhipment at the Port of Surabaya first.In addition, the Port of Surabaya is also known as a port that acts as a hub and opens the economic gate to Eastern Indonesia [8].Then in optimizing the ferronickel shipping process from the smelter to the factory, what acts as a decision variable is the amount of cargo carried by ships in one year.The parameters set in this optimization model are as follows: Subject to: Where: ZC : Minimum transportration cost (USD/year) i : the first group of general cargo ships h : the second group of general cargo ships j : port of origin node k : port of destination node FC : fixed cost (USD/year) VC: variable cost (USD/year) Qjk: number of cargoes carried from j to k (ton/year) Dk : total demand in k (ton/year) Sj : total supply in j (ton/year) KTjk : number of frequencies used of ship from j to k (roundtrip/year) KTjkmax : maximum frequency required of ship to deliver cargo from j to k (roundtrip/year) Dr : total demand in Surabaya FI : number of flow-in cargoes to hub port FO : number of flow-out cargoes from hub port Equation ( 6) is a constraint to limit the amount of cargo transported by ships from the mine not exceeding the volume of production.For equation (7), this constraint limits the amount of cargo that enters the smelter not less or fulfils the smelter's demand.Equations ( 8) and ( 9) are limits to the number of optimum transported cargo not exceeding the maximum transported cargo from the calculation results.Next, the limitations for hub ports.This limitation is needed to help the model regulate the rate of entry and exit of cargo at the hub port [9].Makassar Port Constraints in equation (10) illustrates that the number of goods entering the port must be the same as the goods leaving.For the constraints at the Port of Surabaya, it is stated in equation (11), the difference between the cargo that enters and the cargo that leaves the Port must be able to meet the demand from factories in the region.

Supply and Demand
Currently, there are a total of 296 nickel mines recorded in Minerba One Data Indonesia (MODI) belongs to the Ministry of Energy and Mineral Resources.The 296 nickel mines are a combination of Contract of Work (KK), OP (Production Operation) and IUP (Mining Business Permit) permits.On the other hand, as of 2020, there are 12 IUP OP and KK nickel mines which are suppliers of operational smelters.The smelters that were reviewed in this study were 10 ferronickel smelters which were already in operation and were still under construction as shown in Table 1.  1, is supplied by mine sites that are still the same holding company or are affiliated with related smelters, which are shipped by land (trucks, conveyors).For several smelters, the company's supply of nickel is also bought from mines outside the island.The following is a list in Table 2.There are four smelters with different locations, namely Smelter 1 on Obi Island, Smelter 2 on Gebe Island, and Smelter 4 and Smelter 5 in Bahodopi.The amount of supply and demand is an assumption of the demand for nickel ore from this smelter, usually around 20-30% of the total production requirement.This is because these smelters are already supplying nickel from nearby companies and supplying from outside the island to cover their shortage of nickel needs, as shown in Table 3.

Table 3. Smelter for shipment from mine site to smelter
In the ferronickel smelter scheme to a stainless steel factory, the product focus under review is stainless steel flat products with ferronickel as a raw material.The following is a list of these factories in Table 4.The stainless steel factories reviewed are located in four provinces on the island of Java, namely two in East Java (Surabaya and Sidoarjo) with port locations in Tanjung Perak, three in West Java (Bekasi), one in the Special Capital Region of Jakarta (Pulogadung) with a port location in Tanjung Priok, and two in Banten (Cilegon) with a port location in Ciwandan, as well as different needs for ferronickel and stainless steel production.Due to limited data, the amount of ferronickel in stainless steel processing that is the demand for these factories assumes that the composition of the use of ferronickel as a raw material for stainless steel ranges from around 10-30% of the total production per tonne, depending on the type and quality of the stainless steel will be made.In this study, the assumption is that the need for ferronickel is 20% of the total production output per year.Figure 2 is the location points of mine sites, smelters, stainless factories, and ports that are the subject of this study.

Location of Mine -Smelter -Factory
There are three ports of origin for nickel mines located on Gag, Weda and Kendari Islands.The same number also occurs in the smelter which also has three destination ports located on Gebe Island, Obi Island and Bahodopi.Following are the details of the port of origin and destination, as well as the mileage matrix in Table 5.  Ferronickel smelter to a stainless-steel factory From a total of 10 ferronickel smelter reviews, eight port points of origin and four port points of destination were obtained, of which two are hub ports in Table 6.

Port of Origin Port of Destination
Surabaya With these various origins and destinations, the permutation method was used to find the number of alternative routes and 2,604 route combinations (port to port and multiport) were obtained [10].The route combination is then simplified for the optimization process by using the milk-run method [11].Thus, obtained 368 alternative routes used in optimization.

Marine Transportation for Nickel ores
This research examines two alternative modes of nickel transportation, namely tug-barges (Figure 3) and dry bulk carriers (Figure 4).Dry bulk ships that cannot dock at jetties owned by mining companies will usually anchor at the anchorage area, and loading and unloading activities are carried out using a ship to ship system.For tug-barge specifications can be seen in Table 7 and Table 8.While the specifications for dry bulk carriers can be seen in Table 9.The following ships were selected based on variations in capacity, and four alternative dry bulk carriers with different DWT with a DWT range of 4,000 to 50,000 were obtained.

Marine Transportation for Ferronickel
Marine transportation that usually transports ferronickel is general cargo (Figure 5), because ferronickel is a breakbulk type of cargo.Ferronickel in the form of granules or slag will be packed in one ton sacks.Ferronickel general cargo ships are divided into two categories, the first is small general cargo with a capacity range of 1,000 to 7,000 DWT, the port of origin is from the TUKS Smelter in Table 10.Analysis results of Phase 1, from Mine site to Smelter is an analysis of the need for sea transportation for the delivery of nickel ore from the mine to the smelter.From three mine sites and four smelters considered in this study, the following table is optimization results based on frequency as shown in Table 12.Obtained, a total of five selected routes and six tug-barge units with a size of 270 feet, 300 feet, and 365 feet.The total cost is 20,246,592 USD/year and the total unit cost is 56.97 USD/ton.

Table 13. Recapitulation of shipment optimization results from smelter to factory
On the other hand, the results of stage two, from Smelter to Factory.This stage is an analysis of the shipment from the ferronickel smelter to the stainless steel factory.The shipping option to meet the demand for 2.19 million domestic ferronickel is through transhipment at Makassar Port as a hub port and requires 18 general cargo ships and nine selected routes.The shipping method used is port to port.By selecting the transshipment pattern, the delivery system is divided into two, namely from the smelter to the hub port, then from the hub port to the stainless-steel factory.Summary or recapitulation of optimization results in stage two is in Table 13.

Conclusion
The need of sea transportation after downstream policy implementation can be divided into two phases: (a) from the nickel mine site as a provider of raw materials to the ferronickel smelter as a place to purify and process nickel ore, and (b) from the ferronickel smelter as a provider of semi-finished commodities to the stainless-steel factory, which will later process these commodities into finished goods. From nickel mine site to smelter, the optimum ship selected is tug barge. The shipping option to meet the demand for 2.19 million domestic ferronickel is through transshipment with Makassar Port as a hub port and a total of 18 general cargo ships are required.By selecting the transshipment pattern, the delivery system is divided into two, namely from the smelter to the hub port, then from the hub port to the stainless-steel factory.

Further research development
This study requires improvement on determining the impact of mineral export products to the Indonesia's Balance of Payment (BOP) particularly for bauxite and copper.

Table 1 .
Smelters with their port locations Nickel ore, which is input to produce ferronickel smelters in Table

Table 2 .
Mine sites of nickel in Indonesia

Table 4 .
Ferronickel plant overview list

Table 5 .
Distance from mine to smelter

Table 8 .
Specification of barge

Table 9 .
Specification of dry bulk carrier

Table 10 .
(1)cification of general cargo group(1)While general cargo category two in Table11is larger in size, has a capacity range of 11,000 to 27,000 DWT, and the port point of origin is from the hub port.

Table 12 .
Recapitulation of shipment optimization results from mine to smelters