JAKARTA: Indonesia will likely refrain from fully banning mineral ore exports in 2014 as the move would spur unemployment in the producing regions, said Jim Lennon, commodities consultant for the Macquarie Group Ltd.
"I don't expect Indonesia to fully ban ore exports next year," said Lennon at the metal Bulletin Asian Nickel Conference in Jakarta on Wednesday. "They will have to work out a political compromise."
Indonesia is seeking to increase the value of commodity exports and strengthen control over pricing. While the country plans to ban exports of ores, including nickel and bauxite, the government is studying some exemptions for mining companies that already have smelters or are planning to build them. The chances that Indonesia will ban ore sales are 50-50, according to Glencore Xstrata Plc.
"Ahead of the election in April 2014, it's hard to imagine the government creating mass unemployment in Sulawesi and Kalimantan," Lennon said, referring to the country's top producers of nickel and bauxite.
Nickel, used in stainless steel, has slumped 19 percent this year as stockpiles rose to an all-time high because of rising supplies and weak demand. Inventories in warehouses monitored by the London Metal Exchange rose 4.7 percent to 222,012 tons this month, bourse data compiled by Bloomberg shows.
The government may opt for "a selective ban on those operators that have not demonstrated sufficient progress in their plans to build smelting capacity," Deutsche Bank analysts including Michael Lewis wrote in a report on Wednesday.
Another option is "the imposition of onerous export duties to incentivize all parties to speed up their smelter plans," the bank said.
Comments from government officials suggest they are trying to work out a solution, said Lennon, who believes that China has built "huge" stockpiles of ore in preparation for any disruption of supplies. - Reuters
Source : The Jakarta Post, September 26, 2013