ASSET: A clump of iron ore from a mine. Picture: REUTERS
ASSET: A clump of iron ore from a mine. Picture: REUTERS

JAKARTA — Indonesia’s metal ore and concentrate exports have ground to a complete halt, a trade ministry official said on Friday, signalling the turmoil in the mining sector after a ban on ore shipments and an export tax were imposed nearly two weeks ago.

The southeast Asian nation introduced a controversial ore export ban on January 12, although last-minute amendments aimed to ease the impact of the export ban on concentrate miners such as Freeport McMoRan Copper & Gold and Newmont Mining. They now face a progressive export tax on concentrates.

"There has been no concentrate export since January 12," said Bachrul Chairi, director-general of foreign trade at the trade ministry. "(At present), no miners or companies have requested export approval for concentrate or processed ore from the trade ministry."

Freeport Indonesia and Newmont are in talks with the government over the new rules and are yet to resume exports since the new tax was introduced, while the Mineral Entrepreneurs Association has filed a legal challenge against the ore export ban.

Under the new rules, concentrate exports are allowed to continue for some minerals, including copper, lead, iron ore, zinc and manganese, though with different purity rules attached.

The surprise inclusion of an escalating export tax appears to have forced all other miners to stop shipments.

"It’s a problem because nobody can abide by the export tax, including Freeport," said Erry Sofyan, secretary-general of the Indonesian Bauxite and Iron Ore Entrepreneurs Association.

Indonesia is also the world’s biggest exporter of nickel ore, refined tin, thermal coal and home to the fifth-largest copper mine and top gold mine. Freeport and Newmont produce 97% of Indonesia’s copper.

Indonesia’s iron-ore shipments to China jumped 72.5% last year to 17.6-million tonnes.

"Our supplier says the policy might be loosened next month, but right now it is forbidden," said a iron-ore trader based in China’s eastern Shandong province. "We are planning to talk with some small miners in other countries like Malaysia, Thailand and the Philippines for possible supplies."

Indonesia-based miners that process some or all of their metal production through smelters, such as nickel producers PT Aneka Tambang and PT Vale Indonesia, have escaped the full impact of the new rules.

The long-planned ore ban aims to eventually boost Indonesia’s profits from its mineral wealth by forcing miners to process their ores before export.

But there are fears a short-term cut in foreign revenue could widen the current-account deficit, which has undermined investor confidence and hurt the rupiah currency.

The ban is expected to cut government revenue by as much as $820m this year, the finance minister has said.

Thousands of mineworkers have already been laid off ahead of the ban, sparking protests in Jakarta.

Reuters