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The Indonesian Government is hoping to kick-start its economy by lifting a partial ban on exports of metal ore and mineral concentrates, a policy originally aimed at boosting domestic processing and reducing the South East Asian nation’s exposure to volatile commodity prices.
In January, the Indonesian Government ended months of speculation by lifting its partial ban on the export of unprocessed minerals, underlining not only the parlous state of South East Asia’s largest economy, but also its status as a major supplier of nickel ore and bauxite, for aluminium production.
The controversial policy was intended both to boost smelting capacity by developing higher value domestic processing facilities and reduce Indonesia’s exposure to volatile global commodity prices.
Instead, mining industry leaders such as Tedy Badrujaman, CEO of state-controlled Antam, which had its numbers hit hard by the ban on nickel ore exports in 2014, argued that the law not only hurt revenues but also threatened to decimate local economies, particularly in Kalimantan and Sumatra.
Faced with industry unrest, a significant budget deficit, and having missed its 2016 revenue target by $17.6bn, the government under President Joko Widodo had little choice but to perform a volte face.
Over the next five years miners will be permitted to export mineral ore, including nickel ore, bauxite and concentrates of other minerals, provided they can show progress toward smelter development.
Coal and minerals director Bambang Gatot ordered nickel and bauxite miners to reserve at least 30% of smelter capacity to process low-grade ore, defined as below 1.7% nickel, which can potentially be exported if installed smelter capacity cannot absorb miners’ production. Bauxite with an aluminium oxide content of at least 42% may also be exported ‘in certain amounts’ under the new regulations.
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