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Indonesia’s Export Ban Flip-Flop Sows Confusion: QuickTake Q&A

Workers operate a wooden raft to dredge for tin ore off the coast of Bangka Island, Indonesia, on Thursday, July 30, 2015. The islands of Bangka and Belitung produce more than 90 percent of the tin in Indonesia, which is the world's biggest exporter of the metal.
Photographer: Dimas Ardian/Bloomberg

Seeking greater long-term returns from its vast mineral resources, Indonesia opted for some short-term pain. It banned the export of mineral ores in 2014 and encouraged mining companies to build smelters. The aim: to transform from a shipper of low-grade raw materials to a manufacturer of high-grade products such as aluminium and copper cathode. The landmark export policy, announced in 2009, gave resource companies five years to hatch smelter projects that together will cost about $20 billion. Then last month, Indonesia delivered a surprise: It scaled back the export ban, sending ripples through the world’s metals markets.

Most mining companies missed the government’s deadline to build smelters, leading to a pile-up of lower-grade nickel ores (used in stainless steel) and bauxite (the principal ore of aluminum). That hit the government coffers and cooled economic growth.