Jakarta, Jan. 12: Indonesia, among the world’s biggest suppliers of natural resources, halted unprocessed mineral ore exports today to try to promote domestic processing but threatening the country’s nickel and bauxite industries worth more than $2 billion in annual shipments.
Halting exports of nickel ore could spark the biggest shake-up in the global nickel industry in more than five years, with Chinese stainless steel factories that make everything from kitchenware to cars and buildings set to be hurt the most.
The effect on India will be minimal as long as thermal coal is not affected. So far, there is no word that Indonesia is planning to impose curbs on coal outgo. India does import some stainless steel ingredients from Indonesia but the quantity is not expected to be difficult to replace.
In one of his most far-reaching economic policy decisions since taking office nearly 10 years ago, Indonesian President Susilo Bambang Yudhoyono approved the mineral ore export ban.
But in last-minute changes at the weekend, he diluted it to allow exports of copper, iron ore, lead and zinc concentrates to continue, giving a reprieve to US mining giants Freeport McMoRan Copper & amp; Gold and Newmont Mining Corp., which together produce 97 per cent of Indonesia’s copper.
Concentrate refers to the amount of a pure mineral in ore. The law originally banned any ore that was less than 100 percent pure.
No relief was offered to the nickel and bauxite industries, clouding the future for state-owned nickel miner PT Perusahaan Perseroan Aneka Tambang (Antam) and hundreds of other smaller miners.
“Minerals that have to be refined before export are bauxite, nickel, tin, chromium, gold and silver because they don’t have intermediate products,” Sukhyar, director-general of coal and minerals at the ministry, told Reuters.
The long-planned ban hopes to eventually boost Indonesia’s profits from its mineral wealth by forcing miners to process their ores before export. But officials fear a short-term cut in foreign revenue could widen the current account deficit, which has undermined investor confidence and battered the currency.
Yudhoyono’s last-minute regulation significantly lowers the minimum processing requirements for copper, manganese, lead, zinc and iron ore to be defined as concentrates. However, officials have said that such exports would only be allowed until 2017.
Under the proposed changes government officials said 66 companies, which include Freeport and Newmont, would be allowed to continue to export “processed mineral” as they have provided assurances to the government that they would soon build the necessary smelters.
More details are expected to be announced this week.
The companies likely to feel the most impact from the ban are miners of nickel and bauxite, numbering in the hundreds.
Shortly before the ban took effect, Freeport halted copper exports and said it would not resume them until there was clarity on which minerals can be shipped.
A major economic impact could make the ban a hot political issue in this year’s legislative and presidential elections in the world’s fourth most populous country.
Thousands of mine workers have already been laid off ahead of the ban, sparking protests in Jakarta.