Show smelter development and get permission for bauxite export, Indonesian govt tells its miners

In a volte face performed in the face of political opposition, Government of Indonesia has asked local mining companies to show specific proof against smelter development progress if they wanted to sell bauxite and nickel ores to the offshore markets.

In January, the erstwhile major South-east Asian mineral ore exporting country lifted partial ban on the export of bauxite and other ores (unprocessed minerals), underlining the parlous state of the economy. The policy amendment was intended to boost smelting capacity by developing value-added domestic mineral processing facilities while reducing Indonesia’s exposure to the global commodity price volatility.

However, the logic behind the amendment did not go down well with mining industry leaders.

President Joko Widodo

Tedy Badrujaman, CEO of state-controlled Antam, said the law not only hurt revenues of his company but also posed as a threat to decimate local economies. This was followed by further industry unrest. In order to pacify the domestic bauxite mining and nickel ore mining industry players and narrow down a significant budget deficit, the government under President Joko Widodo said miners will be permitted to export bauxite and concentrates of other minerals for the next five years, provided they can show progress toward smelter development.

Coal and minerals director Bambang Gatot ordered bauxite miners that they can export bauxite with an aluminium oxide content of at least 42 per cent ‘in certain amounts’ under the new regulations.

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The prohibition on bauxite export and other mineral ore exports, imposed way back in 2014, was designed to give Indonesia's resources sector a competitive advantage over neighbouring countriies, but lifting the export partially could cut short the development of smelting and other processing facilities, fear industry experts.