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Indonesia's ambition to influence global commodity prices through a newly established exchange risks undermining rather than strengthening its market position, according to analysts and industry players cited by Reuters.
Sarjito, recently appointed Head of Commodity Trading Supervision, stated that all transactions involving designated commodities would eventually be required to be routed through the new exchange, which is scheduled to begin operations next year. The exchange is part of a broader push by President Prabowo Subianto to expand the state's role in managing the country's natural resources. Indonesia is the world's largest producer and exporter of palm oil, nickel, and thermal coal, and a significant supplier of copper and bauxite.
In a speech to parliament last month, Prabowo said Indonesia would prefer to withhold its commodities rather than sell them at what he described as excessively low prices. Some critics, however, view the exchange plan less as an economic strategy than as a vehicle for political messaging. Yanuar Nugroho, a former senior official who served as an adviser to former President Joko Widodo, called the plan a nationalist narrative that was 'good campaign material' but not economically sound policy.
Industry players and analysts argue that effective price discovery depends on market confidence. Forcing participants to use a designated exchange could instead drive investors toward competing venues. The concern comes as a weaker rupiah, sluggish stock market performance, and questions about economic management have already begun to test investor patience.
'Indonesia is a major player in several commodities, large enough to cause serious distortions in the market. However, attempts to set global commodity prices are likely to backfire,' said Ian Hiscock, Principal at Singapore-based Energy Shift Institute. He warned that the policy risked pushing compliant investors out of the Indonesian market, leaving it populated by players seeking to adapt rules to local conditions, potentially eroding transparency.
In the nickel market, such a shift could accelerate the global transition toward battery technologies that do not rely on nickel. Buyers could also be encouraged to finance projects from suppliers they consider more reliable. An industry player who requested anonymity said buyers would likely pursue alternative suppliers or products if prices set on the Indonesian exchange were significantly higher than those on competing platforms.
Simeng Deng, a Senior Analyst at Rystad Energy, said buyers could simply exit the Indonesian market altogether. She noted that Indonesia's coal exports, the world's largest by volume, already face pressure as major buyers China and India diversify their supply toward Mongolia, Russia, and South Africa. Deng added that the new exchange risked becoming merely an administrative layer for domestic transactions rather than a genuine price discovery mechanism, potentially accelerating the migration of buyers away from Indonesia. She also pointed to rising compliance costs that could delay capital deployment until exchange rules become clearer.
A spokesperson for President Prabowo and officials from the Financial Services Authority (OJK) did not respond to requests for comment.
The challenge Indonesia faces is already visible in palm oil. Despite being the world's largest producer and exporter, the palm oil exchange launched by Indonesia in 2023 has so far recorded low trading volumes. Several regional and global efforts to launch alternative palm oil futures contracts have failed to dislodge Malaysia's dominance. Bursa Malaysia launched its Crude Palm Oil (CPO) Futures contract in 1980 and remains the global benchmark for pricing. Bursa Malaysia Derivatives recorded trading of 19.62 million CPO Futures contracts in 2025, while data from Indonesia's Ministry of Trade showed that CPO Futures trading in Indonesia during the same year amounted to just 30,341 lots, equivalent to 151,705 tonnes.
'Competing with Bursa Malaysia will be very difficult,' said Julian McGill, Managing Director of edible oils consultancy Glenauk Economics. He noted that Indonesia's status as the world's largest producer offered surprisingly limited advantages in establishing a global price-setting venue.
M.R. Chandran, Chairman of agritech company IRGA, expects the Indonesian and Malaysian palm oil markets to operate alongside each other rather than seeing a new exchange emerge to replace the existing benchmark. According to Chandran, the Jakarta exchange would likely function more as an internal benchmark for export duties and the settlement of domestic obligations, while the Bursa Malaysia CPO Futures contract would remain the global benchmark for price discovery and risk management.
Malaysian Palm Oil Association Chief Executive Officer Roslin Azmy Hassan said Kuala Lumpur 'must not become complacent', although it has yet to see any 'direct threat'. She noted that liquidity, transparency, and international investor participation take years to build.
A Jakarta-based palm oil analyst working for a global trading company said concerns over transparency, legal certainty, and the exchange's independence had discouraged market participants from trading on Indonesia's exchange. Even supporters of the initiative acknowledge that building credibility takes time. 'Successful exchanges are not built overnight. Successful exchanges are built over time,' PT Jakarta Futures Exchange CEO Yazid Kanca Surya told Reuters.
Source: IDN Financials