Indonesian minerals policy is rarely a straightforward affair and so it proved again in the run-up to the Jan. 12 ban on exports of unprocessed ores.
There was plenty of last-minute drama, particularly concerning the treatment of copper concentrates. These were first unexpectedly included in the ban and then granted an eleventh-hour presidential exemption, but with an equally unexpected caveat of rising export taxes.
One of the expected restraints on Indonesian policy-makers was the likely flow-through impact from the ban on a local mining industry that is a major employer and a major revenue generator for the country.
There was no shortage of dire warnings about mass lay-offs and mine closures if the ban went ahead. Given the somewhat parlous state of the Indonesian economy, there was widespread scepticism that the government would really want to kill off large parts of its resources sector.
Yet not only did the authorities go ahead anyway, but it is becoming clear that they are fully prepared to countenance the short-term pain for the longer-term gain of forcing the mining sector down the value-added processing path.
The proof comes in the form of the mines ministry's forecasts for minerals production this year. [ID:nL3N0L337H]
Output of both bauxite and nickel ore, key export streams to processing industries in China, are expected to collapse.
Nickel ore output is seen slumping from 60 million tonnes in 2013 to just 3.5 million tonnes this year. Bauxite production is expected to contract even more dramatically from 56 million tonnes to just one million tonnes.
Copper production is expected to rise from 450,000 tonnes to 640,000 tonnes, although ironically it is the copper market that is experiencing the most immediate impact from the ban.
Both Freeport and Newmont thought their existing contracts of work shielded them from future changes to Indonesian minerals policy.
Now, however, they face the prospect of rising export taxes on concentrate shipments and a complete ban from 2017.
Both have said they intend to engage with the authorities with a view to finding, to quote Freeport Chief Executive Richard Adkerson, a "mutually agreeable resolution".
But in the interim both have suspended concentrate shipments and, unless a deal can be reached pretty quickly, both will have to start trimming output rates.
Analysts at Barclays Capital estimate that the shipping cessation could already have cost the market 45,000 tonnes in supply in January.
Source: Reuters
There was plenty of last-minute drama, particularly concerning the treatment of copper concentrates. These were first unexpectedly included in the ban and then granted an eleventh-hour presidential exemption, but with an equally unexpected caveat of rising export taxes.
One of the expected restraints on Indonesian policy-makers was the likely flow-through impact from the ban on a local mining industry that is a major employer and a major revenue generator for the country.
There was no shortage of dire warnings about mass lay-offs and mine closures if the ban went ahead. Given the somewhat parlous state of the Indonesian economy, there was widespread scepticism that the government would really want to kill off large parts of its resources sector.
Yet not only did the authorities go ahead anyway, but it is becoming clear that they are fully prepared to countenance the short-term pain for the longer-term gain of forcing the mining sector down the value-added processing path.
The proof comes in the form of the mines ministry's forecasts for minerals production this year. [ID:nL3N0L337H]
Output of both bauxite and nickel ore, key export streams to processing industries in China, are expected to collapse.
Nickel ore output is seen slumping from 60 million tonnes in 2013 to just 3.5 million tonnes this year. Bauxite production is expected to contract even more dramatically from 56 million tonnes to just one million tonnes.
Copper production is expected to rise from 450,000 tonnes to 640,000 tonnes, although ironically it is the copper market that is experiencing the most immediate impact from the ban.
Both Freeport and Newmont thought their existing contracts of work shielded them from future changes to Indonesian minerals policy.
Now, however, they face the prospect of rising export taxes on concentrate shipments and a complete ban from 2017.
Both have said they intend to engage with the authorities with a view to finding, to quote Freeport Chief Executive Richard Adkerson, a "mutually agreeable resolution".
But in the interim both have suspended concentrate shipments and, unless a deal can be reached pretty quickly, both will have to start trimming output rates.
Analysts at Barclays Capital estimate that the shipping cessation could already have cost the market 45,000 tonnes in supply in January.
Source: Reuters
