Japan May Take Indonesia to WTO Over Curbs on Metal Exports

Japan, the world’s second-largest nickel user, called on Indonesia to remove restrictions on mineral-ore exports, saying it may complain to the World Trade Organization should compromise talks fail.

“The country’s unilateral measures aren’t appropriate,” Takayuki Ueda, director-general of the manufacturing industries bureau of Japan’s Trade Ministry, said yesterday in an interview in Tokyo. Japan, which would prefer to negotiate a solution, may file an objection with the WTO should Indonesia proceed with a complete ban on exports as planned in 2014, he said.

Indonesia said May 3 it would rein in exports of 14 minerals including nickel, copper, gold and iron ore from May 6. The curbs on those shipments, combined with a 20 percent tax on the remainder, are aimed at raising their value and boosting local smelting, potentially increasing costs for smelters in Japan, the third-largest economy. The resource-poor nation also suffered when China’s restrictions on exports of rare earths sent prices soaring, and complained to the WTO this year.

“There are no other countries that would immediately replace Indonesia,” said Toshio Nakamura, the general manager of stainless raw materials at Mitsui & Co., Japan’s biggest trader of nickel. “We will consider how we will secure the raw material” under the new regulations for the mining industry.

Nickel Prices

Prices of nickel, which is used to strengthen stainless steel in products from kitchen sinks to aircraft fuel tanks, may rise about 18 percent to an average $20,000 a metric ton in the fourth quarter, according to the median of 16 analyst estimates compiled by Bloomberg. The price has fallen 9.1 percent this year, the worst performance of the six major metals traded on the London Metal Exchange.

“It’s not an export ban,” Thamrin Sihite, director- general of minerals and coal at Indonesia’s Energy and Mineral Resources Ministry, told reporters in Jakarta today. “Ore exports are still allowed but with requirements,” he said, adding that the country needs to ensure domestic demand is met, while managing the environment and regulating mining permits.

Indonesia is the world’s largest producer of nickel ore. Exports of the raw material from the Southeast Asian country may drop as much as 20 percent next half, Sukristiyawan, senior marketing manager at PT Aneka Tambang, the nation’s second- biggest producer, said in an interview last month.

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“For countries with mineral resources, it’s natural to ship value-added products rather than raw materials to develop their own industries,” said Kotaro Shimizu, chief analyst at Mitsubishi UFJ Research & Consulting Co.’s environmental policy department. “To secure stable supplies, it’s important for Japan to provide technology and training through government-to- government negotiations.”

The Trade Ministry’s Ueda is due to meet Rizal Affandi Lukman, deputy to Indonesia’s coordinating minister for economic affairs for international trade and economic cooperation, in the “not-so-distant” future, after the two countries agreed to hold talks regularly, he said.

“Fighting against Indonesia is not Japan’s objective -- Japan has a long-term relationship with Indonesia and business ties are also close,” Ueda said. “We’d like to seek solutions through dialogue.”

Japan Imports

Japan imported 3.65 million tons of nickel ore in 2011, according to Finance Ministry data. Indonesia supplied 1.95 million tons, or 53 percent, followed by New Caledonia with 27 percent and the Philippines with 19 percent, the data show.

Mitsubishi Corp. (8058), Japan’s biggest trading company, and Pacific Metals Co., a ferronickel producer, have joined France’s Eramet SA in a project to tap Indonesia’s Weda Bay nickel reserves. On Feb. 16, Eramet Chief Executive Officer Patrick Buffet said a development decision should be made in the first half of 2013.

Japanese smelting companies, including Sumitomo Metal Mining Co., import ores to produce ferronickel and refined nickel.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net.

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net.

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