last-minute presidential or Supreme Court intervention might
add another dimension to the much talked about and hugely
convoluted Indonesian minerals export ban, which is slated for
a Jan. 12 rollout but isnt yet set in stone.
The argument about the
need for resource nationalism isnt unique to Indonesia,
but the country still needs infrastructureincluding
roads, ports and energy plantsto be able to attract more
investment in the downstream industry.
If the ban goes
through, shipments of mineralsincluding nickel ore,
copper, bauxite and goldwill be affected to varying
The government will
issue a regulation before Jan. 12 noting the minerals that can
be exported, but it isnt yet clear if big producers like
Freeport-McMoRan Copper & Gold Inc., Phoenix, and
Greenwood, Colo.-based Newmont Mining Corp. will be able to
ship copper concentrates after this date.
There have been
various lobbying efforts by companies and officials alike to
delay the ban, clarify it or allow for exports if there were
plans for building downstream plants.
scenariosa complete ban on Jan. 12, a partial ban or
postponing the banare being widely discussed in the
In December, the
Indonesian parliament voted against changing the 2009 Mining
Law and said the export ban would proceed as scheduled.
believe the country will halt mineral exports even with the
great risk to its economy.
"It seems unlikely
that anything can be changed so close to the ban date," one
market participant said, adding that the ban will support
prices for such metals as nickel.
The nickel market
would be wrong to assume that long-awaited restrictions on ore
exports from Indonesia will not materialize, David Wilson,
Citigroup Inc.s director of metals research and strategy,
told AMM sister publication Metal Bulletin in
Time and again market
participants have drawn attention to the ramifications for the
countrys economy, already under pressure from a
"The government will
lose 45 percent of $8 billion ... just from Freeport and
Newmont operations in Indonesia," according to Syahrir
Abubakar, executive director of the Indonesian Mining
Income from ore
exports is expected to be $10 billion in 2013, and the proceeds
from mining and metal exports account for about 6.6 percent of
the national budget, Soemantri Widagdo, adviser to
Indonesias industry ministry, said in November at
Metal Bulletins 3rd Asian Bauxite and Alumina
Conference in Singapore.
The Indonesian ore
export ban would hurt the countrys trade and current
account deficits, and also put pressure on the Indonesian
rupiah, which fell to a five-year low of 12,213 vs. the dollar
on Dec. 20 and declined more than 20 percent for the year.
This is adding to the
pressure on the country to reassess its decision on the
parliamentary elections in April and presidential election in
July mean that issues about the countrys economic
strength will continue to be heated.
"I think an all-out
ban will probably go ahead in January," one analyst said, "but
with the elections later in the year they will have to allow
for exports. In the short term, this will create tightness,
especially in nickel, but prices will go up, so that is the
The likelihood of a
partial ban is much higher, with Indonesian government
officials reportedly saying that the government will ban
exports of minerals by miners without smelters but will
regulate shipments from miners who process ores.
Freeport, owner of the
Grasberg copper-gold mine in Indonesia, has said it is working
with the countrys government to understand the
implications of the ban.
On the other hand, PT
Newmont Nusa Tenggara (PTNNT), Indonesias second-largest
copper exporter, has reiterated that it already adheres to the
countrys mining law as it processes copper ore into
"While our contract of
work guarantees our right to export copper concentrate and even
though PTNNTs operation complies with the requirements of
the Mining Law, we are prepared to take other reasonable steps
to support the policy," PTNNT president director Martiono
Hadianto said in a statement Dec. 10.
"While still somewhat
vague, the inclination of Indonesian government officials to at
least address copper producer concerns suggests that copper
concentrate exports may not be affected to the same extent as
nickel ore or bauxite exports," Barclays Capital Plc analysts
said in a note to clients in December.
approach has been advocated by market participants in Indonesia
By selling copper
concentrate, the country is able to capture 93 percent of the
ultimate value of the metal, as only 7 percent of the value
chain can be captured in the smelting and refining stage,
By selling bauxite,
Indonesia can only capture 5 to 8 percent of the ultimate
value, whereas 95 percent of the value chain lies in smelting
In nickel, only 20
percent of the value lies in the mining and processing stage,
whereas the remaining 80 percent is in the refining stage,
Others believe that a
tax increase is more likely than a complete halt of raw
The consensus, though,
seems to be that minerals like nickel and bauxite are at
greater risk than copper.
PT Aneka Tambang Tbk,
Indonesias largest bauxite miner, has said it will follow
government regulation and stop exporting minerals as of Jan.
As for nickel, prices
are at least set for a short-term gain, with the
Philippinesthe other big exporter of nickel
oreunequipped to make up the shortfall from
As stakeholders lobby
the government to reconsider its decision, a stay order by
Indonesias Supreme Court or an intervention by president
Susilo Bambang Yudhoyono calling on parliament to review the
Mining Law could delay its execution.
Mining Association is petitioning the countrys highest
court for more clarity on the legal wording of the mineral
"We are still going to
the Supreme Court to ask for legal opinion on whether the ban
is allowed under the terms of a framework law passed in 2009,"
Abubakar said Dec. 26.
"We will also go to
the constitutional court, as few articles of the law contradict
each other and are against the constitution," he said, adding
that the industry body is going to ask for the deletion of some
articles under the law and the amendment of some other
A version of this
article was first published in AMM sister publication Metal