Indonesia Allows More Metal Ore Shipments Before 2014 Export Ban

Indonesia said that it will allow more shipments of unprocessed mineral ores for the rest of this year by dropping quotas before an export ban comes into force as planned in 2014. A 20 percent tax on exports will be retained.

“This is a temporary policy, until the 2014” ban on unprocessed ores is in place, Finance Minister Chatib Basri said in Jakarta today. “We see that the restriction or quota has caused a drop in exports revenue.”

Southeast Asia’s biggest economy unveiled a policy package today after a record current-account deficit and worse-than-estimated economic growth and inflation data prompted investors to sell stocks and drove the rupiah to its weakest level since 2009. The country is the largest exporter of refined tin and thermal coal.

“Commodity prices remain weak, the mining sector’s profitability is declining rapidly, and government receipts through royalties and taxes would have suffered if the government had not taken any measures,” said Xavier Jean, a Singapore-based director of corporate ratings at Standard & Poor’s. “This is not coming as a surprise.”

Mining companies will be allowed to ship all of their production this year, Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said in a telephone interview today.

“The purpose of this policy is to increase volume of export and countries’ revenue and also help companies in trouble,” said Siswoutomo.

Indonesia banned exports of 32 types of unprocessed metals in May 2012, while waiving the restriction for companies that operate under so-called mining business licenses that are planning to build local smelters.

Those companies are subject to a 20 percent tax and export quotas. Companies with mining business licenses can export unprocessed ores only until Jan. 12, 2014, according to a regulation signed by Energy and Mineral Resources Minister Jero Wacik on Aug. 1.

Major companies operating under the Contract of Work system, such as Freeport-McMoRan Copper & Gold Inc. (FCX) and Newmont Mining Corp. (NEM), have been in negotiations with the government over whether they can continue to export. Freeport signed a memorandum of understanding to supply copper concentrate to two local smelters to support the government’s policy to encourage local processing, said Rozik B. Soetjipto, its president director, on Aug. 13.

To contact the reporters on this story: Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net; Widya Utami in Jakarta at wutami@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

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