Indonesia eases export ban on bauxite and nickel ore with new policy

As an update on the ore export ban imposed in Indonesia, two years back, Indonesia amended the policies on Thursday allowing exports of nickel ore and bauxite and concentrates of other minerals under specific conditions.

The ban on unprocessed ore exports was imposed in 2014 to encourage value added domestic smelting industry. As a result, the government of Southeast Asia's biggest economy has faced a huge budget deficit missing its 2016 revenue target by $17.6 billion.

A new draft may have been prepared to resume shipments to cure the big gap. The new regulations will include changes in permit extensions, which can now be issued up to five years in advance of expiry, as well as new divestment requirements.

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"Where, considering installed (smelter) capacity, they can't absorb production, (ore) will be allowed to be sold overseas," Coal and Minerals Director General Bambang Gatot told reporters.

The new rules will allow export of Bauxite with an aluminium oxide content of at least 42 per cent "in certain amounts".

Gatot confirmed that exports would be allowed for up to five years and the government would decide volumes to be exported.

"The government is between a rock and hard place. It's in a dire fiscal position on the one hand and allowing nickel and bauxite (exports) will help with that," Jakarta-based foreign legal counsel Bill Sullivan told Reuters.

“Regional economies will grow, (and) mining areas that died because of the export ban can grow again," Antam CEO Tedy Badrujaman told Reuters.

Last year, Badrujaman said Antam hoped to export 20 million tons of low-grade ore to help attract smelter project financing, around 10 times more than the ore it currently processes domestically.

The new rules however disappointed many investors in Indonesia's smelting industry.

"Chinese companies will be most unhappy because they have invested something like $15 billion in developing smelters that are already in operation," Jonatan Handojo, executive director of the Processing and Smelting Companies Association (AP3I), told Reuters

According to R. Sukhyar, a representative from the Indonesia Smelting Association, many aspects of the new rules were confusing. "The industry is still in its infancy and the government should wait before changing the rules," he added.