Indonesian export ban threat breathes new life into nickel price
Indonesia’s proposed ban on export shipments of unprocessed metals is set to come into effect on January 1 and mining companies operating in the country are forecasting disaster if the government implements it in full.
Indonesia, with a population of 240 million, is the world’s premier thermal coal exporter, a nickel, bauxite and tin powerhouse and is also rich in gold and copper.
FT.com quotes Garibaldi Thohir, a vice-chairman of Indonesia’ chamber of commerce (Kadin) and chief executive of Adaro, the country’s number two producer of thermal coal for power stations as saying: “If the government implements a full ban, the whole industry will collapse:”
“With just over two months to go before the ban comes in, the government and many mining companies are engaged in a game of brinkmanship. Most investors are betting that the government will not risk losing billions of dollars in tax revenues and royalties by halting exports.”
It is particularly the beaten down nickel market that could feel the impact should Indonesia go ahead with the restrictions, boosting producers in the rest of world.
The price of the steelmaking raw material has already picked up nearly 5% on the London Metal Exchange this month after hitting 4-year lows early in October.
Nickel for delivery in three months jumped to $14,340 this week as Chinese importers stockpile the metal in anticipation of supply disruptions.
“It’s [Chinese imports] such an important swing factor for the market that you could see a decent rally in the nickel market if a ban is strictly enforced – at least 20 or 30 percent,” said Daniel Smith, head of metals research at Standard Chartered told Reuters last week.
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3 Comments
anon
Indonesia did much the same thing with films a few years ago. They made them pay unrealistic taxes, and so the movie studios decided to not show them, you had to go to Singapore to see Harry Potter. A few months later they changed their mind back again, as they could see it wasn’t working. Cinemas in Indonesia didn’t have any customers, were losing money, so the Indonesian regulators went back to what was before. All it did was hurt Indonesian businesses. It’s the usual cycle.
The bureaucrats always go way over the top in Indonesia to try and enforce change, because they know that most of the businesses, and most of the government agencies who administer them, either can’t enforce or wont follow the changes in any case, so they try and get the other few, where they can enforce such changes, with way over-the top measures, partly to make up for the ones which can’t. Its a strategy of ‘blanket change -one size fits all’ approach. They rarely make even the slightest measures to properly implement such changes. Once the dust settles, they often go back to essentially what was there before, and the bureaucrats who made or proposed the changes claim a victory on their resume, without any benefit or change. ‘Implemented sweeping reforms to increase revenue’. It is a cycle that goes on and on, but at the end of the day, if Indonesian businesses and people suffer, which they usually do, they usually retract their policies.
Anas Gunawan
Anon, this time, the case is much different that the cinema import ban years before. The cinema import issues has much lesser effect to national awareness of economic independence and sovereign compared with the raw-resources export issues did. The national sovereign in managing our rich national resources is one of the important things demanded by our people now. It is the time for our nation to reverse the previous colonial economics culture where a colony exported raw materials to its ruler and become a market for its foreign ruler industrialist. We will produce the finished goods as much as needed by our people then will export the production excesses. Furthermore, in the near future, I believe that our people will demand the government to apply more protective and restrictive import and foreign trade policies to save our farmers and industries from china’s aggressive export policies.
Robo
One positive thing which seemed to have occured with this ban, is there was a mini spending spree by some indonesian mining companies to upgrade the mines to process the raw material. To construct new process plant results in new power plant upgrades, so a bit of work has been generated.