By Wilda Asmarini and Fergus Jensen
JAKARTA Jan 8 Indonesia's mining ministry
sought to ease a controversial mineral export ban before its
Sunday deadline, but still looked set to prohibit more than $2
billion worth of annual nickel ore and bauxite shipments.
Indonesian government officials are scrambling to pass
regulations to ease a ban on unprocessed mineral ore exports
from Jan. 12.
The ban aims to boost Indonesia's long-term return from its
mineral wealth, but officials fear a short-term cut in foreign
revenue could widen the current account deficit, which has
undermined investor confidence and battered the rupiah.
"The (mining) ministry proposed that miners will be given
flexibility to export concentrate or processed minerals until
2017," Sukhyar, director general of coal and minerals at the
ministry, told reporters.
"After 2017, they will only be allowed to export metal or
refined mineral," he said.
The mineral ban is one of Indonesian President Susilo
Bambang Yudhoyono's biggest economic policy moves in his nearly
10 years in office.
Under the proposed regulations, miners such as U.S. giants
Freeport-McMoRan Copper & Gold and Newmont Mining Corp
would still be allowed to export copper, manganese,
lead, zinc, and iron ore concentrate until 2017.
Freeport and Newmont, however, would not be allowed to ship
copper concentrate after 2017. The two companies account for 97
percent of the country's copper production and currently refine
only about a third of their copper output in Indonesia.
"The point here is ... around three years from now, they
must purify," Sukhyar said.
The ministry decided to keep the ban on nickel ore and
bauxite because of ample domestic smelters, he added. Indonesia
is the world's top exporter of nickel ore.
Out of the hundreds of nickel miners in Indonesia, only PT
Antam and PT Vale Indonesia currently
process their ore domestically.
Last month, the mining ministry forecast nickel production
would tumble 78 percent this year compared with 2012, while
bauxite would plummet 97 percent.
Analysts expect global nickel prices to rise if Indonesia
follows through on its ban.
"If there is a ban, we think there is considerable upside,"
said Citi commodities strategist Ivan Szapakowski, who forecast
that the LME's benchmark 3-month nickel contract could
rise as high as $17,000 a tonne from $13,465 currently.
Shares in Indonesian mining firms rose on the Jakarta stock
exchange on Wednesday, with the mining index up 1.8
The proposal could still be tweaked and must be approved by
the president, who is expected to support the changes.
"The president has asked us to consider all possibilities in
the coming days so that we put (Indonesia) at little risk as
possible," Energy and Mining Minister Jero Wacik told reporters.
"The point remains that raw minerals must not be exported."
Yudhoyono's administration has backed policies aimed at
generating greater profits and creating more jobs from the
country's vast natural resources, with some success in tin,
cocoa and palm oil.
Under the new rules, mining companies must process their ore
before shipping it overseas, a measure initially passed in 2009
to boost the value of exports from Indonesia, the world's top
exporter of nickel ore, thermal coal and refined tin.
But companies have hesitated to invest the hundreds of
millions of dollars necessary to build smelters due to ample
global refining capacity, low commodity prices, and Indonesia's
history of backing away from controversial policies.
As a result, the ban could cause a significant decline in
mineral exports and force companies who do not have refining
capacity to lay off hundreds of thousands of mine workers.
The uncertainty has already hit production, with
Singapore-owned nickel miner Ibris Nickel Pte Ltd becoming the
first operator to halt operations.
Up to 200,000 workers at bauxite mines could lose their jobs
under the proposed new rules, said Didie Suwondho, a senior
official with Indonesia's influential chamber of commerce.
Indonesia exported $2.1 billion worth of nickel ore and
bauxite in 2012, according to the central bank.