Indonesian mining officials announced yesterday that they would not be pursuing a plan to allow the export of low-grade bauxite. The plan faced a tidal wave of opposition from domestic smelters as well as from investors from the People’s Republic of China who have invested vast amounts in the country to build processing plants.
The export of metal ore has been banned since the first days of 2014 in an effort by the government to encourage domestic smelting, as they expected such activities to provide jobs and lead to the export of more value-added products. However, the Indonesian government has reexamined the ban due to concerns that the 2017 deadline for full processing of all minerals may not be met.
In addition, the Indonesian government is scrambling to find ways to fill the US$16.9 billion deficit. The mining sector seems an appealing target, as the ban has dropped the percentage of GDP the industry provides by a full two percent.
The world learned on Friday that the government was reexamining the ban, much to the delight of state-owned mining firm Aneka Tambang, but they were all but alone in looking forward to an end to the ban.
“Most likely, there won’t be any relaxation for exports of nickel ore and bauxite,” acting energy and mineral resources minister Luhut Panjaitan told media assembled in Jakarta on Wednesday. He went on to say that the country “has attracted investments of about $5 billion, including for stainless steel, so why do we need to export if we can process domestically?”
Dropping the ban would jeopardize up to US$12 billion in investments and almost two dozen smelter projects throughout the country.
“We didn’t imagine this level of progress,” he said.
Pandjaitan said that he expected to be able to fill in more details for rules on metals mining in the country at some point next week.