Indonesia to Ban Ore Exports in ’14 After Parliament Backing

 

“The decision is unanimous between the minister and nine factions in Commission Seven,” said Wacik, referring to the parliamentary body in charge of mining and energy which he met in Jakarta today. “The Mining Law has mandated that ore must be processed domestically. Now we must implement it.”

 

Indonesia, the world’s biggest producer of mined nickel, is seeking to increase control over commodity supplies and boost the value of exports. The country ships ore to China for nickel pig iron, an alternative to refined metal, and supplies bauxite to the world’s aluminum industry. Citigroup Inc. raised its 2014 nickel forecast by 3.8 percent to $17,000 a metric ton last month, saying the curbs were being mispriced by the market.

 

Nickel climbed as much as 2 percent to $13,918 a metric ton on the London Metal Exchange today, the highest level in more than three weeks. The contract dropped 19 percent this year and is the worst performer among the six main metals on the LME amid record stockpiles.

 

Mining companies will be allowed to ship ores overseas only until Jan. 12, said Wacik. The country had planned to exempt companies that are operating or planning smelters. The government received 125 proposals for smelters, of which 28 are under construction, Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said today.

 

‘Tactical Move’

 

The parliamentary commission called for the law requiring the ban to be implemented consistently and completely, Chairman Sutan Bathoegana said today.

 

“We asked parliament to give some exemptions but the Commission Seven agreed to request government commitment in carrying out the law,” said Wacik. While the decision will spur a reaction from miners and cut export revenue, “if it’s implemented fully, companies will eventually adjust and smelters will be built,” he said.

 

The announcement may be a tactical move by the government to set the tone and strengthen its power in negotiations with mining companies, Xavier Jean, director of corporate ratings at Standard & Poor’s in Singapore, said by e-mail, adding that miners are probably trying to get clarity from the government.

 

Bauxite Shipments

 

“Our base case remains that the ban will be watered down to some extent, not least because Indonesia does need to restore some confidence in its currency,” said Jean. “Time is running out for the government to announce a compromise.”

 

The rupiah has lost almost 20 percent this year, the worst performer among 11 major currencies in Asia tracked by Bloomberg. One-month rupiah forwards slid yesterday to a four-year low on speculation companies are boosting purchases of dollars to make year-end payments.

 

The country exported 46.5 million tons of nickel ore in the first 10 months from 41.1 million tons in the whole of 2012, according to Harya Adityawarman, secretary at the Directorate General of Coal and Minerals at the ministry. Bauxite shipments were 47.01 million tons from 30.2 million tons, he said yesterday, citing surveyors’ report.

 

Indonesia is also the world’s largest tin supplier and from Aug. 30 ordered exporters of the metal used in smartphones and packaging to trade it on a local exchange before shipment.