The Indonesian ore export ban and mining export taxes for those
companies that can export will most probably result in higher
prices for Indonesian ores, as supply falls and sellers pass
higher prices to buyers, sources told Metal Bulletin.
"In nickel's case, many companies will have to cease producing,
as they have no processing plans," Priyo Pribadi Soemarno,
former executive chairman of the Indonesian Mining Assn (IMA)
"Indonesian nickel supply will immediately fall. Most probably,
producers will pass their costs on to buyers in the form of
higher prices," he said.
Bauxite miners will probably stop mining low-grade ores as
a result of the ban being implemented, a producer in Riau said.
"The mining taxes will increase the cost of production for our
ores. Indonesian bauxite ores are competitive only because they
are cheap," he said.
"If we raise prices, buyers will get bauxite supply from other
parts of the world. We may stop mining [lower grade bauxite]
because it's just not worth mining it anymore," he said.
The mining sector is unlike the manufacturing sector, as it is
a "price taker", Tony Wenas, deputy chairman of the IMA said.
"Manufacturers are price setters. They set prices according to
their costs of production," he explained. "Miners are price
takers. We will take prices that are set by the market,".
"If other demand and supply factors dictate that prices cannot
go up, Indonesian producers will choose to absorb the mining
taxes to keep their competitive advantages among other global
suppliers," he added.
Current profit margins still generally allow producers to do
so, he added.
The decision to proceed with the ban and taxes ends three months of uncertainty
, as Indonesia
moves to seek higher return from its rich minerals and metals