Bloomberg News

Indonesia Ban on Unprocessed-Metal Exports Effective May 6

May 03, 2012

Indonesia will ban exports of 14 raw minerals effective May 6, with an exception for miners that plan to build local processing facilities. Those miners will be assessed an average tax of 20 percent on ore shipments.

The regulation applies to copper, lead, nickel, gold, silver, zinc, chromium, bauxite, manganese, molybdenum, platinum, antimony, iron ore and sand iron, Energy and Mineral Resources Minister Jero Wacik said at a press briefing in Jakarta today.

The largest nickel-ore and bauxite supplier to China announced the prohibition in February, two years ahead of schedule. The new rules apply to holders of mining business licenses issued after 2009. Companies with a so-called contract of work, including Phoenix-based Freeport-McMoRan Copper & Gold Inc. (FCX:US) and Newmont Mining Corp., will be allowed to ship ores until 2014.

“Miners will still be allowed to export after meeting some requirements, including obtaining permits, Edi Prasodjo, a director of coal at the Energy and Mineral Resources Ministry, said at a conference in Jakarta earlier today. “The IUP must be clean and clear, paying taxes and royalties,” Prasodjo said, referring to a mining business license by its Indonesian initials.

‘Killing Us Slowly’

“We were shocked when the government announced in February that nickel ore would be banned, I. D. Susantyo, a member of the board of directors at the Indonesian Nickel Association, said in an interview. “Now they said we can still export but we have to pay tax and meet other complicated requirements. It’s still killing us slowly because it will cut our margin because our buyers will pay the same price based on the international benchmark.”

The government hasn’t decided whether to tax some coal shipments, Coordinating Minister for the Economy Hatta Rajasa said at the briefing.

“There are things that need to be studied,” he said. “For example, will it be necessary to apply an export tax to producers that pay lower royalties.”

The government will order miners exempted from the ban to sign a letter of commitment that they will stop all ore shipments by 2014, Thamrin Sihite, director general of minerals and coal at the energy ministry, said last month. The exporters must also obtain an export permit from the Trade Ministry, said Deddy Saleh, director general of foreign trade at the ministry.

Reduced Shipments

The Indonesia Mining Association estimated in March that the ban will cut nickel-ore and bauxite exports by as much as 75 percent this year. Indonesia shipped 33 million metric tons of nickel ore and 40 million tons of bauxite last year, according to Syahrir Abubakar, the group’s executive director.

The curbs, aimed at lifting the value of shipments and boosting local smelting capacity, apply to exports of raw metals including iron ore, gold, and silver, and bring them in line with the rules that have applied to tin since 2002, with only refined exports permitted. Indonesia is the world’s biggest shipper of tin, used in packaging and as solder.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Fitri Wulandari in Jakarta at fwulandari@bloomberg.net; Femi Adi in Jakarta at fadi1@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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