Bloomberg News

Indonesia Proposes Allowing Concentrate Exports as Ban Looms (2)

January 08, 2014

Indonesia’s Energy and Mineral Resources Ministry proposed that mining companies be allowed to continue shipping mineral concentrates for three years, easing concern that copper sales may be disrupted by a ban on raw ores.

“The important thing is that it is not ore,” said R. Sukhyar, director-general for coal and mineral resources at the ministry, referring to exports. Only shipments of processed minerals will be permitted and “by 2017 there’ll be no more concentrate exports,” he told reporters in Jakarta today after a meeting between industry executives and officials.

The government of Southeast Asia’s largest economy is poised to ban overseas shipments of unprocessed ores after Jan. 12, choking off supplies of nickel ore and bauxite. Indonesia accounts for 18 percent to 20 percent of global nickel supply, 9 percent to 10 percent of aluminum supply from bauxite and 3 percent of copper supply, Goldman Sachs Group Inc. estimates.

The minimum level of copper in concentrates may be set at 15 percent, said Rozik B. Soetjipto, president director of PT Freeport Indonesia, a unit of Freeport-McMoRan Copper & Gold Inc. (FCX:US), who attended today’s meeting. That’s less than the percentage produced by Freeport at the world’s second-largest copper mine at Grasberg and below the level at Newmont Mining Corp. (NEM:US)’s operations at the Batu Hijau mine on Sumbawa Island.

Copper for delivery in three months on the London Metal Exchange gained 0.3 percent to $7,375.25 a metric ton at 9:23 p.m. in Singapore today. Nickel fell as much as 0.4 percent to $13,455 a ton, the lowest level since Dec. 4, and traded at $13,490. It reached a seven-week high of $14,480 on Dec. 23.

Ban Proceeds

Indonesia will go ahead with the ore ban and provide flexibility to mining companies exporting minerals, said Jero Wacik, Energy and Mineral Resources Minister. The government is completing details on timing, purity limits and criteria of eligible companies, he told reporters after a Cabinet meeting today. It will keep a tax on mineral exports, said Industry Minister M.S. Hidayat. They decline to elaborate.

“We haven’t finished setting the criteria,” said Hidayat. “We may report to the President on Friday.”

Freeport Indonesia’s concentrate is about 27 percent to 30 percent copper, according to the company website. Production is normal and may exceed last year’s level, Soetjipto said today. Concentrate produced by Newmont’s local unit has a purity of about 22 percent, a company fact sheet shows.

Bachrul Chairi, director general of foreign trade at the Trade Ministry, said in a text message last month that the prohibition applied to all companies, including contract of work holders such as Freeport and Newmont, and government purity rules meant their concentrates would not be allowed for export.

Pig Iron

The country may set the minimum purity level for nickel pig iron exports at 4 percent, said Shelby Ihsan Saleh, chairman of the Indonesian Nickel Association, who attended the industry meeting. That’s less than 6 percent in a regulation issued last year. Nickel pig iron is a processed product.

Indonesia shipped 41.5 million tons of nickel ores in the first nine months of 2013, up from 29.4 million tons a year earlier, World Bureau of Metal Statistics data show. Exports were mostly in the form of laterite ore grading 1 percent to 2 percent nickel, according to RBC Capital Markets.

China, the world’s biggest consumer of nickel and aluminum, buys much of its nickel ore and bauxite from Indonesia. It received about 71 percent of its bauxite imports and 52 percent of its nickel ore purchases from the Southeast Asian country in 2012, RBC Capital Markets said in a report Dec. 19.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

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


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