Indonesia export ban leaves mining In turmoil, Nickel prices rally
Tuesday, 14 January 2014 00:01
JAKARTA,(Reuters): Indonesia’s mining sector was left in turmoil on Monday after the government pushed through a controversial ban on exporting unprocessed mineral exports.
Global nickel prices and mining shares rallied in the first trading day after the ban in the world’s top nickel ore exporter. The ban on a range of mineral ores took effect on Sunday, five years after a law was passed to force miners to build processing plants.
The government provided a last-minute reprieve for exporters to keep shipping some minerals, although U.S. miner Freeport McMoRan Copper & Gold was waiting for confirmation so that it could continue to ship copper.
The policy aims to reduce reliance on raw material exports, but many firms failed to invest in enough smelter capacity to process all of Indonesia’s mining output -- meaning that a total ban would have forced extensive shut downs of output and cost the economy billions of dollars.
Late changes approved by President Susilo Bambang Yudhoyono -- to ease any short-term economic pain -- should allow copper exports by Freeport and Newmont Mining Corp.
The government has yet to publish the regulations clarifying those changes and offered no such relief to the nickel and bauxite industries, sparking a rally in the long-depressed nickel price as well as gains for miners.
Freeport has halted copper exports from its remote Grasberg mine -- one of the world’s largest copper mines -- pending clarification and government approval to resume shipments.
Freeport Indonesia CEO Rozik Soetjipto told Reuters at the weekend he believed the company, which smelts only about a third of its output, would be allowed to keep shipping copper concentrate.
“Everybody is in a wait and see phase. It is a very strange situation,” said Agus Suhartono, chief operating officer at nickel miner Ibris Nickel, which does not have a refinery yet and halted operations this month.
Indonesia is the world’s biggest exporter of nickel ore, as well as refined tin and thermal coal, and home to the fifth largest copper mine and top gold mine.
London Metal Exchange nickel rose 4 percent on Friday and added a further 1.4 percent on Monday, helping push up shares of Indonesian nickel miner PT Vale Indonesia by 5.4 percent and state-owned PT Perusahaan Perseroan Aneka Tambang (Antam) by 1.5 percent.
Energy and Mines Minister Jero Wacik said there were 66 companies that would be exempt from the ban because they have or plan to build smelters for their unprocessed minerals.
PT Vale Indonesia is not affected by the ban as it already processes its nickel into nickel-in-matte, an intermediate product, but hundreds of small firms which simply ship low-grade ore will be.
Among other nickel miners, Australia’s Western Areas rose nearly 9 percent, while the Philippines’ Nickel Asia Corp. was up 5.7 percent by 0730 GMT.
Nickel may rise further, but a break above $15,000 a tonne -- which has capped its trading band for the past six months -- could be a sell signal, a Singapore-based metals trader said.