November 21, 2013 / 11:26 AM / 4 years ago

Japan's nickel smelters to be hit hard by Indonesia export ban

3 Min Read

TOKYO, Nov 21 (Reuters) - Japanese nickel smelters will be severely impacted by Indonesian bans on exports of unprocessed mineral ores due in January as Japan imports 43 percent of ferro-nickel materials from Indonesia, the head of mining industry body said on Thursday.

With a current account deficit at a near-record high, the Indonesian government is scrambling to ease nationalistic resource rules that were passed more than a year ago, including a ban on mineral ore exports from January 2014.

Southeast Asia's largest economy is the world's top exporter of nickel ore, thermal coal and refined tin, and home to the world second-biggest copper mine.

"So far, Indonesia has not come up with any specific actions to ease its new mining law. We are worried about it," Hiroshi Yao, Chairman of Japan Mining Industry Association (JMIA), told a news conference.

"If Indonesia's export restrictions of unprocessed mineral ore go into effect next year, an impact on Japanese nickel smelters will be big," he said.

Japan imported 35,000 tonnes of ores to make ferro-nickel in terms of nickel content from Indonesia in 2012, representing 43 percent of total import of 81,000 tonnes, according to JMIA. The rest came from Philippines and New Caledonia.

Ferro-nickel is an alloy made from iron and nickel and is used as a raw material in stainless steel.

Last week, Sumitomo Metal Mining Co Ltd, Japan's biggest nickel smelter, said it planned to import more ore to make ferro-nickel from the Philippines and New Caledonia if Indonesia's export ban on unprocessed mineral ore was introduced in January.

Japan also imported 87,000 tonnes of copper ore in terms of copper content from Indonesia last year, but it only represents 7 percent of its total imports.

"Copper ore supplied from Indonesia can be replaced as Japan's dependency on Indonesia is low and global copper market is over supplied," Yao said.

But Japanese companies holding a stake in a copper mine and a smelter in Indonesia also had concerns about the possible impact on operations of the mine and smelter, he added.

Japanese trading house Sumitomo Corp and three other Japanese firms including Mitsubishi Materials hold 24.5 percent in Batu Hijau copper and gold mine in Indonesia.

Mitsubishi Materials also owns 60.5 percent of Gresik smelter, the only copper smelter in Indonesia. Freeport-McMoRan Copper & Gold Inc. holds a 25 percent in it, while other Japanese firms Mitsubishi Corp and JX Nippon Mining & Metals Corp., a unit of JX Holdings Inc, own the remaining 14.5 percent.

Gresik gets copper ore from two mines in Indonesia - Batu Hijau and Grasberg - and if the mines' operations get affected by the export restrictions, Gresik is expected to face a shortage of copper ore supply.

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