Caterpillar to Hitachi May Face Slow Indonesia Demand on Ore Ban

Indonesia’s ban on exports of mineral ores will stall the country’s demand for the heavy equipment used in mines and construction, an industry association said.

The Heavy Equipment Association of Indonesia, whose members include units of Caterpillar Inc., Komatsu Ltd. and Hitachi Ltd., expects local production of such machinery to be little changed at 6,000 to 6,500 units this year, from 6,127 units last year, its chairman Pratjojo Dewo said in an interview yesterday in Cikarang, West Java.

Indonesia banned exports of all raw mineral ores including nickel, iron and bauxite from Jan. 12, as part of a policy to boost revenue by turning the country into a manufacturer of higher-value products. The curbs have halted shipments by Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp.

“Demand for mining heavy equipment has been slowing since last year,” Dewo said. “The downtrend will probably continue, but hopefully the coal sector will improve.”

Mining in Indonesia, the world’s top producer of nickel ore, tin and thermal coal for power stations, grew 3.9 percent in the fourth quarter of last year, while manufacturing expanded 5.3 percent, both slower than the country’s overall economic growth of 5.7 percent, government data showed today.

Coal Support

PT United Tractors, which assembles and distributes heavy equipment in Indonesia, has fallen 5.4 percent this year, compared to a 2.6 percent gain in the Jakarta stock index.

Indonesia plans to produce 397 million metric tons of coal this year, less than 421 million in 2013, the Energy and Mineral Resources Minister Jero Wacik said in Jakarta on Jan. 29. Coal is not affected by the mineral ban, which the government is using to push companies to invest in building smelters to refine raw ores.

“Mineral smelters will need electricity, which will be generated mostly from coal-fired power plants and it will increase demand for the fuel,” Dewo said.

Indonesia produced 7,947 units of mining and construction heavy equipment in 2012, the highest since the association’s data began in 1997. Mining and construction accounts for 75 percent of output while the rest is for road machinery and other equipment.

Before it's here, it's on the Bloomberg Terminal.