Update COVID-19 in Indonesia: 1,769,940 confirmed infections, 49,205 deaths (22 May 2021)
7 June 2021 (closed)
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On Thursday (12/01) the government of Indonesia said it eased regulations concerning the controversial ban on exports of metal ore and concentrates of other minerals. Based on the New Mining Law that was revealed in 2009, Indonesian shipments of mineral ore would be banned starting from January 2014. This policy was designed in order to boost the development of domestic processing facilities (smelters) and become an exporter of value-added mining products (hence becoming less vulnerable to volatile prices of raw materials).
A last minute presidential regulation, issued just before the mineral ore export ban would take effect in January 2014, allowed for a three-year delay. During this period exports of mineral ore could resume provided the miner would show its commitment to build a smelter. Companies like Freeport Indonesia and Newmont Nusa Tenggara made use of this regulation and obtained temporary export permits to resume copper concentrate exports. Besides showing their commitment to build processing facilities they also had to renegotiate existing contracts in order to make these in line with the 2009 New Mining Law (including a divestment requirement).
Over the past couple of months, as the three-year delay was approaching its deadline, there was a high degree of uncertainty about whether the Indonesian government would indeed ban all shipments of mineral ore per January 2017, or would, again, allow another delay. Most analysts expected to see another delay because smelting capacity in Indonesia remains inefficient today, implying that a full ban would damage Indonesia's mining industry (including the loss of many jobs) and it would undermine government revenue from this sector.
Tedy Badrujaman, CEO of state-controlled Aneka Tambang (better known as Antam), said certain local economies in Indonesia (particularly in Kalimantan and Sumatra) had been dying because of the (partial) export ban over the past three years. Therefore, Aneka Tambang welcomes this latest policy back-flip of the Indonesian government. Revenues of Antam were hit hard after the government banned nickel ore exports in January 2014.
Indonesian Energy and Mineral Resources Minister Ignasius Jonan explained that the new mining rules that were unveiled today ease the controversial ban on exports of mineral ore (which include exports of nickel ore, bauxite and concentrates of other minerals). Over the next five years miners are allowed to export mineral ore provided they show progress toward smelter development. Jonan added that the new rules will strengthen the economy as the (partial) ban had hurt the country's revenues.
Bambang Gatot, Coal and Minerals Director General at the Energy and Mineral Resources Ministry, said the new rules also require nickel and bauxite miners to reserve at least 30 percent of their smelter capacity to process low-grade ore. However, low-grade ore can potentially be exported if installed smelter capacity cannot absorb miners' production.
However, not everyone was pleased to see this revision to the export ban. Jonatan Handojo, Executive Director of the Processing and Smelting Companies Association (AP3I), said the investment climate of Indonesia is damaged due to yet another example of flip-flop policies. He is concerned that relations with China will be damaged as Chinese investors have invested up to USD $15 billion in smelters in Indonesia.
The easing of the controversial ban immediately had a big impact on global nickel prices, while copper retreated from a one-month high. On the London Metal Exchange the nickel price fell 5 percent on Thursday (12/01).