Indonesian Mining industry suffers due to ore export ban

After the government ban on mineral ore export, there has been a drastic fall in national output for a number of commodities this year.

There is a lot of expectation from the new government due to come in soon headed by president-elect Joko “Jokowi” Widodo, to lay out clear policies to regulate the mineral sector that is facing a lot of issues post the ban.

In the period between January and August, 2014, only 2.8 million tons of bauxite was produced which is a sharp decline from 60 million tons that used to be produced throughout the year. The number this year is expected to see only a marginal addition of a few tons by year-end.

The reason behind the ban is to boost the national downstream industry, with an expectation that by 2017, only mineral end products will be exported out of the country. At the moment some processed minerals with regulated purity levels are being allowed to export along with metal end products.

However, the ban has pushed most bauxite miners to close shop as the domestic bauxite demand could not compete with the healthy production. There is only one bauxite processing facility in the country that is owned by the diversified miner PT Aneka Tambang and only requires a yearly 850,000 supply wet tons of bauxite to produce its 200,000 tons capacity of alumina.

Foreign investments are necessary to tie up with the local business to setup smelters and refineries to reap the rich deposits of bauxite available in the country and create the end products that can be exported. This will restart the bauxite mining as well.

“However, in general, foreign investors are still waiting for the new government. It will soon assume office, but investors are waiting for specific policy in the sector,” Tony Wenas, the deputy chairman of the Indonesian Mining Association, said.