Indonesia's Commodity Exchange Bid Won't Work Without Global Trust

In nickel, for instance, Indonesia has cemented its position as the world's dominant producer. In 2025, the nation's nickel mine production was estimated at approximately 2.6 million tons, far outstripping any other competitor.

It maintains a similar top-tier status in palm oil, a leading role in global coal exports and a prominent position in tin production. This scale provides Indonesia with significant market power. Yet, market power is not synonymous with pricing power. A nation may control supply but remain a price taker if price discovery continues to occur in markets that are more liquid, transparent, trusted and integrated into global trade.

Nickel is the quintessential example. While Indonesia commands a lion's share of global production, international nickel prices remain tethered to the London Metal Exchange (LME). The LME is more than a mere transaction platform; it is an ecosystem featuring extensive warehousing networks,“good delivery” standards, physical delivery mechanisms, robust clearing and risk management systems, and a diverse pool of international participants.

This combination allows futures and physical market prices to self-correct through arbitrage. The challenge, therefore, is not“why doesn't Indonesia have an exchange?” but“why should global market participants abandon a trusted benchmark to switch to Indonesia?”

Malaysia offers a more relevant lesson. Bursa Malaysia Derivatives successfully established its Crude Palm Oil (CPO) futures as a primary global price-discovery center. Even the CME Group offers dollar-denominated CPO contracts that settle against the Bursa Malaysia FCPO contract.

In essence, the global market integrated the Malaysian benchmark into its own infrastructure. Indonesia produces more palm oil than Malaysia, but production alone is insufficient. Malaysia succeeded by fusing exchange standards, contract norms, delivery mechanisms, liquidity, international participation, financial infrastructure and institutional reputation.

An international commodity exchange is fundamentally a machine for generating trust. It requires clear quality standards, credible warehousing and delivery points, well-capitalized clearinghouses, robust margin and default management systems, dispute-resolution mechanisms, market-manipulation surveillance, transparent positions, cybersecurity and verifiable transaction data.

Perhaps most daunting of all is liquidity. Without massive transaction volume, bid-ask spreads widen. Without competitive spreads, traders depart. Without traders, there is no price discovery. Without price discovery, the exchange fails to become a benchmark. Without a benchmark, it remains nothing more than a domestic market wearing an international label.

Consequently, the January 1, 2027, target should be viewed as a goal for establishing a market, not as a deadline for becoming a global price center. An exchange can be administratively launched in months, but a global benchmark requires years of track record.

Indonesia also doesn't need to build an“Indonesian LME” for every commodity at once. A more rational approach is to start with commodities that offer the strongest combination of production dominance, trading volume, product standardization, and global market appetite.

Palm oil is the most logical candidate. Nickel holds greater strategic significance but is significantly more complex. Tin is worth considering given Indonesia's strong global production position, though the challenge lies in shifting away from LME reliance.

Coal offers massive volume but faces long-term global demand pressure from the energy transition. Indonesia should focus on establishing one or two truly credible benchmarks rather than chasing breadth for the sake of scale.

Another paradox the government must come to terms with: the more Indonesia wants the world to trust its exchange prices, the more open that exchange must be to the world. Foreign participants must be able to enter, hedge, deploy capital, settle transactions and exit positions without unreasonable friction.