Worry is in the air. “Indonesia’s ban on exports of key mineral ores – unless they are processed in the country – risks backfiring as weaker commodity prices mean it is not cost-effective to invest in expensive smelters and refineries,” reports Reuters.
“The ban, which came into effect on Jan. 12, was unveiled in 2009 as a commodities boom began to froth and Jakarta sought to extract more value from its mineral resources. But metals prices and margins have since fallen, leading to oversupply and less need for building more processing capacity.”
“Worried about the impact on its current account deficit and a sagging rupiah currency, Jakarta tried to ease the ban last month only to be blocked by parliament. This month, it issued exemptions to allow shipments of copper, zinc, lead, manganese and iron ore concentrate, leaving nickel and bauxite – key ingredients in making steel and aluminium – the main targets.”
“Companies considering building alumina refineries are moving slowly as they weigh the big investments required amid caution over Indonesia’s policy flip-flops.”
“A 1 million-tonnes-a-year alumina refinery in Indonesia would cost around $1.5 billion to build. To recover that investment, even without making a profit, the price of alumina – made from bauxite ore – needs to be “well over” $400 a tonne, said Michael Komesaroff, principal consultant at Urandaline Investments, noting alumina trades now at $325-$350 a tone.”
In metal price news for steel…
Chinese steel prices were flat for the day. The price of iron ore 58% fines from India was range bound. Chinese HRC stayed flat. The price of Chinese coking coal remained essentially flat.
The steel billet cash price showed little movement last Friday on the LME at $350.00 per metric ton. The steel billet 3-month price saw little movement on the LME at $355.00 per metric ton.
The US HRC futures contract 3-month price showed little movement last Friday, hovering around $629.00 per short ton. The US HRC futures contract spot price held steady around $672.00 per short ton.