Trade Ministry details mechanism for mineral exports

18 January, 2014 | Source: The Jakarta Post

With raw mineral exports banned, the Trade Ministry is requiring exporters of processed minerals to obtain export permits from the ministry to be able to ship their products overseas.



The export permit requirement only applies to those who wish to export processed minerals, like copper, iron and manganese concentrates, while those exporting refined products, including nickel matte and ferro nickel, are exempt from the obligation.

Both types of exporters, however, will have to be registered exporters at the ministry and undergo pre-shipment verification as the initial step.

The export permit policy, which the ministry has recently issued, acknowledges that exporters have already met the processing level set by the Energy and Mineral Resources Ministry, according to the Trade Ministry’s director general of foreign trade, Bachrul Chairi.

“As the firms are still at the processing stage instead of purification, they should get recommendations on the volume and types of products to be exported from the ministry,” Bachrul told reporters on Friday at his office.

A number of mining companies were requesting recommendations from the Energy and Mineral Resources Ministry and, later, the Trade Ministry would follow up the results to register exporter status, he added.

As the new trade regulation is still in the transition period, exporters of refined products will be given time to adjust until Feb. 3 while they are processing their applications, according to Bachrul.

To carry out the mandatory pre-shipment verification, the government had appointed two surveyors: PT Sucofindo and PT Surveyor Indonesia, Bachrul said.

Indonesia, the world’s biggest exporter of commodities such as nickel ore and thermal coal, and home to the fifth-largest copper mine and biggest gold mine in the world, started last week to enforce the 2009 Mining Law, which bans mineral ore exports.

The ban aims to force mining firms to operate locally, building domestic smelters and other processing facilities.

The move is expected to spur development of the downstream industry in Southeast Asia’s largest economy and to bring significant multiplier effects to the country by way of job creation, bigger export values and higher tax revenues.

In addition to miners building smelters, others have expressed interest in investing in Indonesia to benefit from the ore-export ban.

These include the world’s fourth-biggest diversified miner, Glencore Xstrata, and the world’s biggest aluminum producer, United Company RUSAL, which plan to build a US$1 billion refinery and $6 billion refineries and smelters.

Despite the ban on the export of ore, such as bauxite, nickel, chromium, tin, gold and silver, the government is still allowing exports of concentrates, including iron ore and sans, zinc and lead, as concerns grow that a sudden halt in such exports may stop operations and result in massive lay-offs.

To ensure that exporters of the concentrates are willing to build local processing facilities, the Finance Ministry introduced a progressive export tax scheme starting from 20 percent earlier this week. The figure will gradually increase to 60 percent until 2017.

Under the tax regime, miners who do not comply with the government’s requirement will have to pay higher taxes every six months of the year, thereby making their operations less economically viable and finally forcing them to build smelters.

The highest tax rate of 25 percent now goes to copper producers, such as United States-based miners Freeport-McMoran Copper & Gold Inc. and Newmont Mining Corp., which enjoy the bigger profit margins compared to peer miners.

Both mining giants jointly hold a dominant share of 97 percent of the country’s total copper output.

 

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