What’s Impact from Indonesia New Export Policy? SMM Reports

Published: Feb 15, 2017 10:41
Indonesia’s Finance Ministry said this Monday to levy 7.5 percent export taxes on lead, zinc, iron and copper concentrate.

SHANGHAI, Feb. 15 (SMM) – Indonesia’s Finance Ministry said this Monday to levy 7.5 percent export taxes on lead, zinc, iron and copper concentrate, and 10 percent duties will be imposed on nickel ore with Ni content less than 1.7 percent and on bauxite with aluminum oxide content of at least 42 percent. 

"The rate will depend on the development of smelters, and the more advanced the development of the smelter, the lower the export rate," the Ministry said in a statement. 

LME Nickel to Advance in February on Supply and Demand Support

Aneka Tambang (Antam) has an estimated 5 million tonnes of low-grade nickel ore available for immediate shipping, corporate secretary Trenggono Sutioso said on Monday. 

Not long ago, Sri Mulyani Indrawati, the country's finance minister, said on January 24 that the government will set export duty based on the progress of smelters. Export duty will be exempted once the smelter progress reaches 30 percent, and the duty will be 5 percent if the progress reaches 7.5-30 percent, and will be 7.5 percent for the progress below 7.5 percent. This is slightly different with the new one. 

In fact, Indonesia has been well known for its frequent changes in its nickel ore policy, and market players in the nickel industry has accustomed to this. There were twists and turns in setting its export ban on nickel ore exports effect on January 12, 2014. 

SMM contacts senior market insiders in Indonesia and finds that it remains uncertain for setting standard (by grade or by progress of smelter) of nickel ore export duty. And it will take time for the government to make survey before policy setting and hold hearing at the initial stage, and then the government will also need to cast a vote for this, leaving a long time to go before final conclusion.  

SMM survey of alumina producers also finds that the new policy on bauxite export exists in name only, as aluminum oxide content in bauxite being imported from Indonesia is far higher than 42 percent, and there is no demand for goods with the content below the level in China. Indonesia’s export restrictions on bauxite will likely bolster up bauxite prices, but no detailed policy has been released by Indonesia. Alumina producers will wait for the details to make further decision for uncertainties in carrying out the new policy. 

In addition, exports at Freeport's Grasberg mine in Indonesia have been postponed for expiration of export permit license, with copper concentrate inventories exceeding the capacity already. Freeport said to start laying off workers at the mine, a sign of its tough stance. If Indonesia increases its export duty of copper concentrate to 7.5 percent, costs at local copper mines will grow significantly. The negotiation between copper mine and Indonesian government is expected to be continuing.  

SMM will keep following on the development of policy in Indonesia.  

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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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