Indonesia Ban Metal-Ore Export Ban from 2014 Poses Possible Difficulties for Chinese Importers

SHANGHAI, Feb. 29 -- Indonesia’s Energy and Mineral Resources minister Jero Wacik signed a decree recently. According to the decree, Indonesia will fully restrict exports of unprocessed metal ores. According to Priyo Pribadi Soemarno, president of IMA (Indonesia Mining Association), the export ban will negatively affect producers of nickel ore, iron ore, copper, bauxite, manganese ore and other resources in the short term, but will benefit the country in the long term, as the policy encourages ore producers to establish domestic refineries and not encourage exports of run-of-mine ores.

China’s imports of iron ore from Indonesia surged from 990,000 mt in 2005 to 11.87 million mt in 2011. Before such export ban decree, Indonesia planned to restrict exports of iron ore by imposing export tariff or export quotas.  Proportion of run-of-mine ore imported from Indonesia is relatively low in China, and most ore imported by China is preliminary processed. Therefore, Indonesia’s metal ore export ban will limitedly increase China’s iron ore import costs.

However, a slew of polices adopted by China's major iron ore origins add worries on Chinese businessmen. For example, India and Vietnam adjusted iron ore export tariff for several times. Iran also restricted iron ore exports. Australia plans to levy Minerals Resource Rent Tax and carbon emission tax as well. Coupled with recent metal ore export ban by Indonesia, China is facing potential difficulties in securing iron ore resources. China’s imports of iron ore from Vietnam, Iran and Indonesia were around 30 million mt, accounting for less than 5% of China's total. If other countries also follow suit, China’s iron ore import cost will be further increased in the future. China’s imports of iron ore from Indonesia and Canada both surged by over 140% to hit 15.61 million mt and 12.08 million mt respectively in 2011. Previously, Russia already had intention to levy iron ore tariff. As Russian’s iron ore demand is huge from downstream construction, engineering and pipe industries, it is expected that Russia is quite likely to levy iron ore export tariff in 2012.