○ Indonesian President Prabowo has announced regulations placing the export of three core raw materials—coal, palm oil, and ferronickel—under the direct management and oversight of state-owned enterprises, heralding major tectonic shifts in the global supply chain.

• In May, the President personally announced plans to establish an export oversight agency (DSI) under Danantara, the sovereign wealth fund and investment holding company.

• The regulation plans to transition from current direct exports by private companies to state-owned enterprise intermediary trade, with full implementation scheduled for 2027.

○ Given that Indonesia is the world’s top exporter of the targeted commodities, the regulation is expected to deliver a substantial shock to the global supply chain, with China most likely to bear the brunt of the impact.

• Indonesia accounts for critical shares of global trade volumes: 95% in ferronickel, 48% in palm oil, and 36% in coal, occupying an indispensable position in global supply chains.

• For coal and palm oil, China and India are the largest importers; for ferronickel, 96% is exported to China, meaning the impact on China will be the most significant.

○ While the ostensible purpose of the regulation is addressing macroeconomic challenges (such as easing fiscal deficits and defending the exchange rate), underlying motives also include expanding foreign leverage through strengthened resource nationalism.

• The widening fiscal deficit is largely attributed to surging welfare expenditures, notably the national free school meal program, which amounts to roughly 7% of Indonesia’s GDP.

• Furthermore, narrowing trade surpluses caused by falling commodity prices combined with rupiah depreciation have served as economic drivers behind the regulation.

• Meanwhile, Indonesia has continuously imposed resource export restrictions—such as the ban on raw mineral exports since 2014—and pursues policies incentivizing the transfer of mining and operational rights from foreign firms to state-owned or domestic companies.

• Given that this measure emerged amid diplomatic friction between China and Indonesia (including high-speed rail debt and nickel quota disputes), it may also serve as leverage in bilateral negotiations with China.

○ This measure poses short-term risks to Korean industry, while potentially offering relative long-term opportunities by weakening the competitiveness of Chinese stainless steel.

• In the short term, concerns include rising electricity rates driven by coal price hikes and surging food prices following palm oil price increases.

• Over the long term, however, as Chinese stainless steel products lose cost advantages derived from low-cost Indonesian nickel, potential windfall benefits may arise for the Korean stainless steel industry.