Indonesia may relax rules on the export of metal concentrates following the collapse in metals prices, while keeping a ban on raw ore shipments, according to Energy and Mineral Resources Minister Sudirman Said.
The policy on concentrate shipments, due to be halted from 2017 to push mining companies to build smelters, should be examined to provide maximum value for the domestic economy, Said said in an interview. The government will soon discuss changes to the mining law with parliament, he said on Monday.
“2017 is the deadline for processed-metal exports, but can we meet the targets for smelter construction by 2017? It must be reviewed,” Said said in his office in Jakarta. “We must be realistic to ensure a conducive investment climate,” he said.
Southeast Asia’s largest economy banned overseas sales of raw ores including nickel and bauxite in 2014, while permitting the continued export of semi-processed concentrates for a further three years. Since the ban on ore shipments went into effect in January 2014, base metals have plunged on the slowdown in China, while rival shippers emerged, including producers in the Philippines and Australia.
‘Come to Grips’
“Indonesia has had to come to grips with the present reality of the resource sector environment,” Gavin Wendt, founding director at MineLife Pty Ltd. in Sydney, said by e-mail. “The key here is Indonesia’s authorities are realistic about current challenges and are keen to appease foreign investors, whilst maintaining their longer-term economic goals.”
The curbs were intended to spur investment in processing across the archipelago, enabling Indonesia to produce higher-value commodities. Freeport-McMoRan Inc. and Newmont Mining Corp. are companies that produce copper concentrates in the country. Unless the law is revised, exports of concentrates from Indonesia will also be prohibited from January 2017.
“It was almost inevitable that the 2017 deadline for the export of metal concentrates, would have to be pushed out,” Bill Sullivan, a lawyer specializing in mining at Christian Teo & Partners in Jakarta, said by e-mail. “The more interesting issue is whether, having pushed out the deadline for the export of metal concentrates, the government will also reconsider the existing export ban on unprocessed metal minerals, notably bauxite and nickel.”
Before the 2014 ban, Indonesia was the world’s biggest shipper of mined nickel, which is used to make stainless steel, as well as China’s largest supplier of bauxite, an ore needed to make alumina, the feedstock for aluminum. Nickel plunged 42 percent on the London Metal Exchange last year, while aluminum sank 19 percent.
The low metal prices are a challenge for the country’s goal of promoting processing, according to Said, who said the government would provide incentives to aid development.
PT Freeport Indonesia, Freeport’s local unit, is building an additional smelter as agreed, and the company hopes that the government will still give export permits to finance construction of the project, according to Riza Pratama, a spokesman. There was no immediate reply from Newmont to a request for comment.
The slumping nickel price has hurt producers in Indonesia. Tsingshan Bintangdelapan Group, a Chinese-Indonesian venture that built a smelter after the ban on ore exports, has said it is making a loss of $2,000 on every ton. Plans for new smelters will be put on hold if rates stay where they are now, according to Chief Executive Alexander Barus.
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