Indonesian mines account for about 20 percent of the world’s nickel supply and a hefty chunk of the bauxite (used to make aluminum). China has been importing ever-larger amounts of these and other minerals from its Asian neighbor. Ironically, the more the Chinese buy, the angrier Indonesians become: Rather than purchasing refined minerals from Indonesia, China imports the raw rocks and does the processing itself, thus depriving Indonesians of jobs and tax revenue.
Miners took more than 250,000 tons of nickel out of Indonesian mines last year but processed only about 16,000 tons in-country, exporting the rest. Meanwhile, China refined more than half a million tons.
To make matters worse, through much of last year, China stockpiled Indonesian ore to hedge against any action the government in Jakarta might take to encourage more of the value-added work to stay home. The stockpiling makes Indonesian officials even more irritated. “I just returned from China, and I saw with my own eyes there are 3 million tons of bauxite and 20 million tons of nickel over there,” Industry Minister M.S. Hidayat told reporters on Jan. 8. “That’s what we want to stop.”
Indonesian President Susilo Bambang Yudhoyono is taking action do just that. On Jan. 12 a new rule took effect prohibiting companies from exporting nickel ore and other raw minerals—while allowing miners to ship minerals that first go through processing or refining in Indonesia.
The goal is simple: “No more ore exports,” Energy and Mineral Resources Minister Jero Wacik said last month. “There should be refining or smelting.”
VIDEO: Indonesia Ban on Mineral Exports May Hurt Trade
The ban isn’t ironclad. Responding to objections from multinationals such as Newmont Mining (NEM) and Freeport-McMoRan Copper & Gold (FCX), Yudhoyono’s administration is creating a temporary loophole, permitting them to export copper concentrates, a mix of copper and gold ores. But the government insists the exception won’t last long: By 2017 there won’t be any exports of concentrates, either.
Indonesia is the latest mineral-rich country fighting against ore imports. India used to be a major supplier of iron ore to China, selling 107.5 million tons, or 17 percent of total Chinese imports, in 2009. India’s iron ore exports to China, however, have plunged following bans by several state governments:
For the first three quarters of last year, India exported only 10 million tons, less than 2 percent of China’s total imports, according to Bloomberg Industries. In Africa, officials in the Democratic Republic of the Congo, upset about the lack of local processing, have considered an export ban, too.
For the rest of this article, click here: http://www.businessweek.com/articles/2014-01-13/indonesia-to-china-stop-buying-our-stuff