Indonesia pushed ahead with a watered-down ban on mineral ore exports that will allow Freeport-McMoRan Copper & Gold Inc. (FCX:US) and Newmont Mining Corp. (NEM:US) to keep exporting copper concentrates.
Indonesia’s President Susilo Bambang Yudhoyono signed a regulation for the ore ban, Energy and Mineral Resources Minister Jero Wacik told reporters, after an 11th-hour meeting of government ministers in Cikeas, West Java, yesterday. The rule, which goes into effect today, permits exports of minerals that are processed or refined in the country.
The decision will ease concerns about disruptions to copper shipments and is a compromise that reduces the impact of the ban on the country’s mining industry. Indonesia accounts for 3 percent of the global copper supply, 18 percent to 20 percent of nickel and 9 percent to 10 percent of aluminum from bauxite, according to Goldman Sachs Group Inc. estimates.
“The essence of the government regulation is to uphold the 2009 Mining Law that means starting midnight on Jan. 12, exports of mineral ore will be banned,” said Hatta Rajasa, the Coordinating Minister for the Economy. “That means all must be processed or refined.”
Newmont and Freeport, which runs the world’s second-largest copper mine in eastern Indonesia, can keep exporting concentrates, Wacik said. Over 60 companies that are planning to process ore domestically will also be allowed exports, Wacik said, without giving the purity levels that need to be met.
Details of the rule will be published later, Wacik said.
Nickel futures prices in London rose 3.3 percent on Jan. 10 to close at $13,860 a ton ahead of the expected ban on unprocessed ore exports from the world’s biggest mined nickel producer.
The ban in Southeast Asia’s largest economy is intended to promote local processing, lure investment and spur the output of higher-value metal products. Persistent trade and current-account deficits last year turned the rupiah into Asia’s worst-performing currency in 2013.
The curbs could worsen Indonesia’s 2014 current-account position by as much as 0.3 percent of gross domestic product, Citigroup Inc. said last month, while Nomura Holdings Inc. said it will cost at least $5 billion in export revenue. As many as 800,000 jobs may be at risk from the ban on shipments, the Indonesian Chamber of Commerce and Industry said on Dec. 16.
“We want to avoid mass layoffs,” Wacik said. “We also want to keep companies that are already or planning to process ore to continue their operations.”
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