Indonesia halts nickel exports with potential 200,000 jobs lost
Indonesia rocked the mining world on Sunday putting into effect an outright ban on nickel, bauxite and tin ore exports.
The Asian nation is the world’s premier thermal coal and tin exporter and is also a gold and copper powerhouse, but the ban on nickel and bauxite ore would have the most dramatic effect on markets.
Last week Indonesian energy and resource ministry official scrambled to ease provisions of the raw mineral export prohibition that President Susilo Bambang Yudhoyono signed into law on Saturday, which is the most controversial decision of his 10-year presidency.
Indonesia dominates the nickel export business, accounting for over a fifth of global supply at an estimated 400,000 tonnes of contained metal. Chinese nickel pig iron producers imported more than 30 million tonnes of nickel ore from Indonesia last year and China’s aluminium smelters rely on Indonesia for 20% of their feedstock.
According to the latest rules under the ban, base metals including copper, manganese, lead, zinc and tin will be allowed to be exported in concentrate until 2017.
This benefits producers like Freeport-McMoRan Copper & Gold (NYSE:FCX) who operates the world’s third largest copper mine at Grasberg in the West Papua province and which warned about a 60% drop in output should copper form part of the ban. Phoenix-based Freeport and Newmont Mining Corp. (NYSE:NEM) together account for 97% of Indonesia’s copper exports.
However against expectations of a last minute climbdown by authorities, the nickel and bauxite ore ban as well as the prohibition of unprocessed exports of tin, chromium, gold and silver went into effect Sunday.
the ban “is the biggest supply risk facing base metals in a long time. The market has been very complacent, thinking the Indonesians would backtrack.”