* New policy ends three-year ore export ban
* Smelter industry says policy shift comes too soon
* Rules open way for Freeport to continue exports
* Antam welcomes changes
(Recasts, adds comments)
By Wilda Asmarini and Bernadette Christina Munthe
JAKARTA, Jan 12 Indonesia introduced new rules
on Thursday that will allow exports of nickel ore and bauxite
and concentrates of other minerals under certain conditions in a
sweeping policy shift by the key global supplier.
A ban on unprocessed ore exports was imposed in 2014 to spur
higher value smelting industries, but the government of
Southeast Asia's biggest economy has faced a hefty budget
deficit and missed its 2016 revenue target by $17.6 billion.
The resumption of shipments may have been drafted to help
stop the gap.
The new regulations, which took effect on Wednesday, sent
nickel prices tumbling more than five percent to a four-month
low of $9,660 a tonne before they recovered.
The rules include broad changes to permit extensions, which
may now be applied for up to five years in advance of expiry, as
well as new divestment requirements.
Nickel miners must now dedicate at least 30 percent of their
smelter capacity to processing low-grade ore, defined as below
1.7 percent nickel.
"Where, considering installed (smelter) capacity, they can't
absorb production, (ore) will be allowed to be sold overseas,"
Coal and Minerals Director General Bambang Gatot told reporters.
Bauxite with an aluminium oxide content of at least 42
percent may also be exported "in certain amounts" under the new
Gatot said exports would be allowed for up to five years and
would be restricted to volumes decided by the government and
independent inspectors, but he gave no further details.
"The government is between a rock and hard place. It's in a
dire fiscal position on the one hand and allowing nickel and
bauxite (exports) will help with that," Jakarta-based foreign
legal counsel Bill Sullivan told Reuters.
A mining ministry official said in October that Indonesia
could export up to 15 million tonnes of nickel ore in 2017 if
the ban was lifted, about one-quarter of 2013
The policy shift was welcomed by state-controlled PT Aneka
Tambang Tbk, whose revenues were hit hard after
Indonesia banned nickel ore exports in 2014.
"Regional economies will grow, (and) mining areas that died
because of the export ban can grow again," Antam CEO Tedy
Badrujaman told Reuters.
Last year, Badrujaman said Antam hoped to export 20 million
tonnes of low-grade ore to help attract smelter project
financing, around 10 times more than the ore it currently
The new rules disappointed many investors in Indonesia's
budding nickel smelter industry, which had been boosted by the
Jonatan Handojo, executive director of the Processing and
Smelting Companies Association (AP3I), told Reuters the new
policy "damages Indonesia's image throughout the world and makes
us look like our laws and regulations can be changed just like
"Chinese companies will be most unhappy because they have
invested something like $15 billion in developing smelters that
are already in operation," Handojo said, adding the change could
damage Indonesia's relations with China.
R. Sukhyar of the Indonesia Smelting Association said many
aspects of the new rules were confusing. The ore export ban was
designed to give Indonesia's resources sector a competitive
advantage over its neighbours, and allowing exports again could
cut short its development, he said.
"The industry is still in its infancy and the government
should wait before changing the rules."
The Philippines displaced Indonesia as the world's top
nickel ore exporter in 2014, but has now also started
restricting output due to environmental concerns.
Another Jakarta-based nickel miner, speaking on condition of
anonymity, told Reuters the new rules were a "massive double
blow" for smelters.
"They have to take low-grade ore, which will raise operating
costs, and then on top of that the market will crash and send
prices down further," he said.
The new rules are a mixed bag for U.S. mining giant
Freeport-McMoRan Inc, which now has a window to continue
copper concentrate exports beyond a previously imposed Jan. 12
deadline for full domestic processing, and to extend its
long-term operating permit.
Freeport's Grasberg operation in Indonesia currently exports
around two-thirds of its output as copper concentrate, but its
shipments were stopped indefinitely on Thursday along with those
of other concentrate exporters.
A spokesman for Freeport Indonesia said the company was
studying the new policy but declined to comment further.
Companies like Freeport must also switch from Contracts of
Work (COW) to special mining licences (IUPK) before they can
apply for new export permits or operating permit extensions, a
process mining minister Ignasius Jonan said would be done in a
"maximum of 14 days" once all necessary documents are submitted.
But not everyone was convinced.
"There is still the question of whether there will be an
interruption in operations because of the (administrative)
requirement to change to IUPK," Sullivan said.
To do so, Freeport will have to agree on new taxes and
royalties that it is currently exempt from, and divest up to 51
percent of its Indonesian unit from 30 percent under current
rules. So far it has divested only 9.36 percent.
Asked about the legal risks to the government from the
policy shift, Jonan said "If there is arbitration, I am ready to
(Reporting by Wilda Asmarini and Bernadette Christina Munthe;
Additional reporting by Fransiska Nangoy, Kanupriya Kapoor and
Pratima Desai; Writing by Fergus Jensen; Editing by Mark Potter
and Adrian Croft)