Clyde Russell is a Reuters columnist. The views expressed are his own.
LAUNCESTON, Australia, July 24 (Reuters) – The election of reformist Joko “Jokowi” Widodo as Indonesia’s new president has spurred hopes of a rapprochement with global miners and the scaling back of some of the nationalistic resource policies.
Certainly the new leader of the world’s fourth-most populous nation is making the right noises, telling Reuters in an interview published July 22 that he wants to sit down with mining companies and resolve differences.
And indeed this was followed by Freeport-McMoRan, which owns the giant Grasberg copper mine, saying it expects to “imminently” sign an agreement with Indonesia that will allow for the resumption of exports of copper concentrate.
Newmont Mining Corp also said it was close to a memorandum of understanding with the government that would allow it to resume exports of copper concentrate and re-open its Batu Hijau mine.
These negotiations with the two U.S. mining giants, which account for 97 percent of Indonesia’s copper output, have been ongoing for months, so it’s not clear that Jokowi had any influence on the talks, but equally his election victory may have provided momentum to the talks.
The dispute over copper has been around an export duty on copper concentrate, which was to be followed by a ban on exporting any unrefined copper in 2017.
The two U.S. companies are seeking a reduced export duty and financial incentives to build new copper smelting capacity.
While it appears a compromise is on the cards, copper isn’t the main game in Indonesia and the resumption of exports won’t have much impact on global markets.
Indonesia isn’t among the top 10 copper producers in the world, ranking 13th in 2013, according to the U.S. Geological Survey.
If anything, Indonesian copper exports will add to the surplus market expected this year, putting downward pressure on prices, although this should be balanced against an improving demand outlook on faster Chinese and U.S. economic growth.
The commodities that may be more affected by Jokowi’s victory in this month’s presidential poll are nickel and bauxite.
Until the ban on exporting raw ores came into effect in January, Indonesia was the world’s top exporter of bauxite, used to make alumina, and vied with the Philippines for top global nickel miner.
Since then, exports have plunged to virtually zero, a loss of about $500 million a month in dollar earnings, which is increasing the current account deficit at a time of rising macro-economic headwinds.
For the rest of this article, click here: http://in.reuters.com/article/2014/07/24/column-russell-indonesia-commodities-idINL4N0PZ0XQ20140724