Indonesia Seen Avoiding Total Ban on Ore Exports in 2014

Indonesia may refrain from a complete ban on mineral-ore shipments in 2014 as the country needs the revenue to offset declining income from the oil and gas industry, said an adviser to the industry ministry.

Earnings from ore exports may reach $10 billion in 2013 and proceeds from mining and metals represent more than 6 percent of the national budget, Soemantri Widagdo said at a conference in Singapore today. Growing revenue makes a complete ban unlikely, he said. While he advises the ministry on metals policy, he said he wasn’t speaking on behalf of the government.

The proposed ban is part of wider efforts by Indonesia to increase the value of commodity exports and strengthen control over supply. China, the world’s biggest user of industrial metals, sourced 56 percent of its nickel ore imports and 67 percent of its bauxite needs from Indonesia in the first nine months, customs data compiled by Bloomberg show. The Indonesian Chamber of Commerce and Industry, or Kadin, said today that it wants a transition period of four to five years.

“In the past few years, the contribution of the oil and gas industry to our GDP has been declining and the contribution from non-oil and gas has been increasing,” said Widagdo. “We don’t want to stop exports by 100 percent.”

Most revenue this year is from exports of bauxite, nickel and copper ores, and minerals containing iron, said Widagdo. One way to avoid a total ban is to increase tariffs, he said. The tax on exports stands now at 20 percent.

Compromise Possible

The economic reality for Indonesia is that a full ban would be “nothing short of disastrous,” Peter Richardson, chief metals economist at Morgan Stanley, said at a conference in Melbourne today. There may be a compromise to allow the continuation of some, more heavily taxed ore exports, he said.

While the country plans to halt ore shipments, the government is studying exemptions for mining companies that have smelters or plan to build them. The chances that Indonesia will ban sales are 50-50, according to Glencore Xstrata Plc.

Kadin is seeking a transition period to allow mining companies to build smelters, Didie Suwondho, head of taskforce for minerals downstream, told reporters in Jakarta.

Nickel, used in stainless steel, has slumped 14 percent to $14,630 a ton on the London Metal Exchange this year as stockpiles soared to an all-time high because of increasing production and weak demand. Inventories in warehouses monitored by the LME more than doubled to 236,958 tons since the start of 2012, bourse data compiled by Bloomberg shows.

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