Indonesia Ore Export Ban Seen Spurring Thousands of Job Cuts

Indonesia’s planned ban on mineral ore shipments may trigger hundreds of thousands of job losses in Southeast Asia’s largest economy, an industry group said, urging lawmakers to mitigate the rule’s potential consequences.

“The most important thing is how to prevent 800,000 workers, that are directly or indirectly in the mining industry, who may be unemployed,” Natsir Mansyur, a deputy chairman at the Indonesian Chamber of Commerce and Industry, said in a statement today. Mining companies may go bankrupt, default on loans and stop making tax payments, he said.

The government wants to increase the value of commodity shipments by promoting local processing and plans to prohibit ore shipments from the largest mined nickel producer after Jan. 12. Futures surged to a one-month high in London last week on prospects for disruptions to global supply. A clear transition plan is needed to avoid adding pressure on the current account because of the ore curbs, the International Monetary Fund said in an annual country assessment published today.

“The DPR with the government and mining entrepreneurs need to find a solution on the impact,” Mansyur said, referring to the country’s lower house of representatives by its Indonesian initials. The ban may affect mining contractors, suppliers and communities living near mines, he said.

Ministers Meeting

Three-month nickel traded 0.5 percent higher at $14,164 a metric ton on the London Metal Exchange at 11:30 a.m. local time. The price reached $14,227 on Dec. 12, the highest since Nov. 6. Nickel offers investors the best opportunity among base metals for advances in early 2014 as Indonesia halts exports, according to Barclays Plc.

Indonesian ministers including Coordinating Minister for Economy Hatta Rajasa, Energy and Mineral Resources Minister Jero Wacik and Finance Minister Chatib Basri will meet tomorrow to discuss the ban, said Industry Minister M.S. Hidayat.

“The principle is that the Mining Law will be implemented as it is,” Hidayat told reporters in Jakarta today. Rajasa will explain details of the ban after the meeting, he said.

Indonesia will probably refrain from completely banning ore exports to avoid mass unemployment ahead of election, Jim Lennon, commodities consultant to Macquarie Group Ltd. said in September. The country will hold legislative vote in April, followed by presidential polls in July.

The Southeast Asian country, the leading supplier of bauxite to China, had planned to exempt companies operating and planning to build processing facilities from the ban. Nine smelters will start operation by the end of 2014, Bachrul Chairi, director general of foreign trade at Trade Ministry said last week.

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