COLUMN-Bauxite and the limits of resource nationalism – by Andy Home (Reuters U.S. – March 27, 2015)

http://www.reuters.com/

(Reuters) – It’s been over a year now since Indonesia imposed its ban on the export of unprocessed minerals. The aim of the January 2014 lock-down is to generate greater value for the country and its citizens by forcing operators to build processing plants and export value-added product not raw materials.

Other resource-rich countries, such as the Democratic Republic of Congo, are travelling the same road but Indonesia is way out in front.

The country’s high-stakes strategy, implemented in the face of considerable opposition from both its own mining sector and overseas buyers, does appear to be largely working.

At a practical level flows of nickel ore and bauxite to Chinese buyers have been halted. Indonesia’s mining ministry says there are now 11 nickel-processing projects under way, many of them backed by Chinese nickel and stainless steel producers.

The country’s two top copper miners, Freeport McMoRan and Newmont Indonesia, have been successfully cajoled into committing to a new copper smelter in return for keeping their mining rights.

When it comes to bauxite and the construction of alumina refineries, though, things are not going to plan with policy-makers admitting they may have to partially roll back the ban.

NO TAKERS?

As with nickel, there was an initial flurry of alumina refinery project announcements in the immediate aftermath of the export ban.

All of them were backed by Chinese aluminium producers, who had been buying Indonesian bauxite to feed their own domestic production of alumina, the intermediate product in the aluminium supply chain.

The list of candidates included some of the biggest names in the Chinese aluminium sector such as Chalco, Xinfa and Nanshan.

One year on, though, and initial enthusiasm seems to have evaporated.

Indonesia does have one new refinery, built by local company Aneka Tambang and Japan’s Showa Denko. But it was started in 2011, years before the ban became a reality, and produces chemical-grade rather than metallurgical alumina.

All the other projects have gone, from an Indonesian perspective, ominously quiet, which is why policy-makers are now talking about trying to entice investment in return for bauxite export rights.

For the rest of this article, click here: http://www.reuters.com/article/2015/03/27/indonesia-bauxite-ahome-idUSL6N0WT1TS20150327

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