Indonesian miners may export up to 5.2mn tonnes of nickel ore a year under the country’s new rules, the mining minister said yesterday, only a fraction of its shipments when it was once a top global supplier of the stainless steel material.
Energy and Mineral Resources Minister Ignasius Jonan’s comment came after an industry backlash to the government’s decision on Thursday to reverse a ban on the export of nickel ore and bauxite under certain conditions.
Nickel prices and the shares of companies that had heavily invested in smelters tumbled after the news, as analysts said the resumption of nickel ore exports from Indonesia could flood global markets and wreck prices.
Senior mining officials defended the new rules, saying that the amount of nickel ore that can be exported must correspond to the miners’ smelter capacity and that it will be “comparable”.
“It’s not like they build small smelters and export as much as they can. No, we are going to regulate that,” the deputy mining minister, Arcandra Tahar, told reporters. The government banned the export of nickel ore and bauxite in 2014 in order to spur higher-value processing of mineral ores.
A year before the ban kicked in, Indonesia exported around 60mn tonnes of nickel ore.
The ban cost Southeast Asia’s biggest economy billions of dollars in lost revenue and led to job losses, as many miners laid off their workers.
The Philippines took Indonesia’s crown as the world’s top nickel ore exporter, accounting for around one-quarter of the world’s mined nickel supply, although its government had since restricted output due to environmental concerns.
Under Indonesia’s new rules announced on Thursday, nickel miners must dedicate at least 30% of their smelter capacity to process low-grade ore, defined as having a nickel content of less than 1.7%.
Low-grade ore is harder to process and smelters have been reluctant to take it. But in order for miners to get high-grade ore, they have to dig through low-grade ore first, which then gets thrown out.
“If local smelters cannot absorb the low-grade nickel, why are they not happy that we allow the nickel miners to export some of it?” Minister of Energy and Mineral Resources Ignasius Jonan said.
“The goal of the government is for all the raw materials to be smelted here, but it will take time,” he said, noting that the policy shift would protect jobs and increase export duties.
Indonesia produces 17mn tonnes of nickel ore per year, of which 10mn is low-grade, according to Jonan.
The country’s nickel smelting capacity is currently 16mn tonnes and may reach 18mn this year, he added.
Miners will be able to export ore over the next five years only if they show progress toward building smelters either individually or with partners, among other conditions.
Last year, Tedy Badrujaman, the chief executive of PT Aneka Tambang Tbk (Antam), said the state-controlled miner hoped to export 20mn tonnes of low-grade nickel ore.
Antam’s shares jumped 6.4% on Friday as analysts said the company’s expected increase in sales could make up for a fall in nickel prices.
Asked when Antam will start shipping out nickel ore, the company’s corporate secretary said it was still making calculations.
In 2014, Indonesia banned mineral ore exports while allowing the shipments of concentrates to continue for three more years.
The full ban on concentrate exports was supposed to have kicked in on January 12, but the government also relented on that deadline. Under the new regulation, companies, including US mining giant Freeport-McMoRan Inc, can continue exporting copper concentrate if they fulfil certain conditions, including changing their license. Jonan said the ministry received a letter from Freeport on Friday stating its commitment to convert to the new special mining permit.
The government will grant an export recommendation for Freeport “soon”, Jonan said.
However, Freeport has to divest a stake of up to 51%, from 30% previously, at fair market value and an initial public offering is being considered, Jonan said. Freeport has only divested 9.36% so far. Jonan had met Freeport CEO Richard Adkerson and Chappy Hakim, the CEO of the US company’s Indonesian unit, in Jakarta on Friday, a person with direct knowledge of the matter said.




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