Indonesia to Ban Export of Unprocessed Metals

on Jun 1, 2012

On 3 May 2012, Bloomberg reported that Indonesia was proceeding with its controversial regulation to ban the export of 14 raw minerals. The decision, which is aimed at boosting local smelting capacity, caused serious concerns among exporters, who will be required to draw up plans for how they will process and smelt ore in the country.

The Indonesian ban on un-processed mineral exports applies to gold, silver, copper, lead, nickel, zinc, chromium, bauxite, manganese, molybdenum, platinum, antimony, iron ore and sand iron, as announced by Jero Wacik, Indonesia’s Minister of Energy and Mineral Resources. An exception will be made for miners planning to build local processing facilities, as they will be assessed an average tax of 20 percent on ore shipments.

The new regulation applies to holders of mining business licenses issued after 2009; companies with a “contract of work” will be allowed to ship ores until 2014. Nevertheless, miners exempted from the ban will have to sign a letter of commitment that they will stop all ore shipments by 2014. The director of coal at the Energy and Mineral Resources Ministry, Edi Prasodjo pointed out that miners would still be allowed to export the minerals in question, provided that they meet certain requirements. In addition, exporters will also have to obtain an export permit from the Indonesian Ministry of Trade.!m[](/uploads/story/17/thumbs/smelting_inline.png)

The measures of the Indonesian government have already provoked heated reactions on behalf of exporters. Bloomberg reported the statement of I. D. Susantyo, a member of the board of directors at the Indonesian Nickel Association,that the ban would significantly reduce their margin as their buyers would still pay the same price on account of the international benchmark. The Indonesia Mining Association on the other hand has estimated that the ban will result in a 75 percent cut of nickel-ore and bauxite exports in 2012.

The purpose of the much-debated ban is to increase revenues from the Indonesian mining sector. Considering that Indonesia is a resource-rich country, the mining industry is one of the key contributors to its economy. By permitting only refined exports, the Indonesian government wants to induce investments in local smelter capacity and thus use the success of the mining industry to boost other sectors of the economy. In addition, the ban is likely to generate additional employment in the sector. There are fears, however, that the ban might have a negative impact on the mining industry and particularly, that it would hit the sector’s growth. “The government wants to kill a mouse in a rice field, but they’re burning the whole field,” said Tjahyono Imawan, president of the Indonesian Mining Services Association, as quoted by the BBC.

Nevertheless, the new regulation is in line with the rules which apply to the exports of tin; since 2002 only refined tin exports have been permitted. The decision of the Indonesian government is intended to boost the local smelter industry, yet it remains to be seen whether it will actually drive more revenue or will have a negative impact on the country’s mining industry.


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