Indonesia’s Central Government has introduced new rules that will allow exports of nickel ore and bauxite along with concentrates of other minerals under certain conditions. The shift in policy has attracted mixed responses from the country's mining industry.
A ban on unprocessed ore exports was imposed in 2014 in a bid to encourage the value adding supported by additional smelters and mineral processing industries, but the government has since faced a hefty budget deficit and missed its 2016 revenue target by $17.6 billion. It is believed that the resumption of nickel ore and bauxite shipments may have been drafted to help stop the gap.
The new regulations took effect last Wednesday and include broad changes to permit extensions, which may now be applied for up to five years in advance of expiry, as well as new divestment requirements.
Nickel miners must now dedicate at least 30% of their smelter capacity to processing low-grade ore, defined as below 1.7% nickel. Bauxite with an aluminium oxide content of at least 42% may also be exported ‘in certain amounts’ under the new rules.
Coal and Minerals director general Bambang Gatot told reporters: “Where, considering installed (smelter) capacity, they can’t absorb production, (ore) will be allowed to be sold overseas.
He said exports would be allowed for up to five years and would be restricted to volumes decided by the government and independent inspectors
The policy shift sent nickel prices tumbling more than 5% to a four month low of $9660 a tonne before they recovered.
“The government is between a rock and hard place. It’s in a dire fiscal position on the one hand and allowing nickel and bauxite (exports) will help with that,” Jakarta-based foreign legal counsel Bill Sullivan told Reuters.
The policy shift was welcomed by state-controlled PT Aneka Tambang Tbk, whose revenues were hit hard after Indonesia banned nickel ore exports in 2014. “Regional economies will grow, (and) mining areas that died because of the export ban can grow again,” Antam CEO Tedy Badrujaman told Reuters.
However, the new rules have disappointed many investors in Indonesia’s budding nickel smelter industry, which had been boosted by the export ban.
Processing and Smelting Companies Association (AP3I) executive director Jonatan Handojo told Reuters the new policy “damages Indonesia’s image throughout the world and makes us look like our laws and regulations can be changed just like that.
“Chinese companies will be most unhappy because they have invested something like $15 billion in developing smelters that are already in operation,” he said.
Indonesia Smelting Association spokesperson R Sukhyar said many aspects of the new rules were confusing. The ore export ban was designed to give Indonesia’s resources sector a competitive advantage over its neighbours, and allowing exports again could cut short its development, he said. “The industry is still in its infancy and the government should wait before changing the rules.”
Another Jakarta-based nickel miner told Reuters the new rules were a “massive double blow” for smelters. “They have to take low-grade ore, which will raise operating costs, and then on top of that the market will crash and send prices down further,” he said.
Indonesia