Indonesia’s Mineral Ban That Isn’t Still Endangers Copper Supply

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Well, they only went and did it, didn’t they?

Amid much speculation, Indonesia went ahead and imposed their export ban on minerals and concentrates from Jan. 12 as they said they would.

Except they didn’t – or not quite as they said they would.

Indonesia has been engaged in a running battle with its mineral sector for the last 10 years or more. Since 2002, the government has been trying to force the industry to add more value at home and maximize the return for the country’s exports of natural resources. Tin was the first target, progress on which we will come back to shortly, but this year the decrees of 2007 have matured and the ban imposed on a range of other metal ores and minerals have come into effect on the 12th.

Although the Indonesian government has been single-minded in their drive to control the raw materials sector and extract full value from exports, it has been a long struggle and has been characterized by concessions and exceptions along the way.

This time is no different, with President Susilo Bambang Yudhoyono issuing a last-minute decree to exempt mining giants Freeport McMoRan Copper & Gold and Newmont Mining Corp from the ban, according to reports from Reuters.

Both supply feed to the country’s sole copper smelter/refinery, but both are also large exporters of copper concentrates, a separate article reports. Both are major local employers and both have argued with some justification that copper in concentrate form has already captured most of the value-add in the copper production chain.

To close the mines, concentrators that deprive the domestic smelter of feed (the mines would be uneconomic to run on just domestic feed) would incur such economic pain the government has, for the time being, pulled back.

But make no mistake – in the longer term, the authorities are going to expect them to refine domestically; an objective that in Reuters’ view leaves a significant question mark hanging over the nature and timing of future Indonesian copper supply.

Coming Up: The Nickel/NPI situation and how China depends on it.

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