Indonesian miners may be allowed to resume bauxite exports after a
government official signalled that the Indonesian government is looking
at relaxing its (raw) mineral export ban. This ban, implemented in
January 2014, was introduced in an effort to boost domestic processing
capacity, generate more revenue (by adding value to its mineral
products) and enhance employment opportunities in Southeast Asia’s
largest economy. However, amid the lack of domestic smelting capacity,
the export ban has led to a plunge of exports.
For example, exports of bauxite (an aluminum ore) declined to 2.1
million tons in 2014, significantly down from 55.6 million tons (with a
combined value of USD $1.3 billion) in the preceding year, while bauxite
smelter development has not progressed satisfactorily. Said Didu, Head
of National Smelter Development at the Energy and Mineral Resources
Ministry, stated that Indonesia is in need of a breakthrough to boost
domestic bauxite smelting capacity by 2017.
By allowing bauxite exports, Indonesian miners can obtain additional
funds to invest in bauxite smelters (several bauxite miners are facing
difficulties to finance these facilities). However, not all bauxite
producers will be able to resume exports. Didu said that only those
bauxite miners that have completed the construction of their bauxite
smelting facilities for at least 30 percent will be able to apply for a
license to resume bauxite exports. However, these exports will be
subject to an export tax of at least 7.5 percent (this percentage will
be reviewed periodically based on progress of the smelter construction).
Miners also need to pay a deposit to the government as evidence of their
serious commitment to construct bauxite smelters.
Previously, the Indonesian government had offered a similar deal to the
country’s copper miners (including Freeport Indonesia and Newmont Nusa
Tenggara).
The government’s plan to somewhat ease the mineral export ban is also
part of efforts to improve the country’s wide current account deficit,
which places pressures on the Indonesian rupiah exchange rate. Last
month, the administration of President Joko Widodo said it is
considering to delay the full implementation of the ban on exports of
copper and other mineral concentrates. Originally, this ban was
scheduled to come into effect in 2017, but this may need to be postponed
due to the lack of progress with construction of domestic smelting
facilities.
Indonesia is a global leading bauxite producer and the main supplier of
this mineral to China (before implementation of the ban). After
Indonesia banned exports of bauxite, global buyers turned to Malaysia
and Guinea for the purchase of bauxite.
After the Indonesian government opened room for copper concentrate and
bauxite exports speculation emerged suggesting that it may also ease
restrictions on nickel ore export. This would put pressure on global
nickel prices. In early March, the government said that 11 new nickel
smelters are be built in Indonesia over the next two years (worth a
total of USD $1.4 billion).
Source: Indonesia-investments |