The government has indicated it would put into force the planned raw ore export ban at the start of the new year, but it has yet to offer a concrete implementation statement.
It is expected to enforce a regulation in the 2009 Mining Law requiring companies to process their ore domestically beginning Jan. 12, 2014, after a meeting between the Energy and Mineral Resources Ministry and the House of Representatives Commission VII last week concluded with an agreement to fully implement the controversial law.
Industry Minister MS Hidayat said the government was still working out the details to guarantee the law would be applied completely.
“Give the government a chance to formulate it. The government and the House want to talk about the implementation. The law must be put into practice,” Hidayat said.
Under the Mining Law, mining companies are required to build domestic processing facilities in an attempt to boost downstream industry in the country. As a consequence of the law, miners will no longer be able to sell unprocessed ore overseas starting next January.
Despite the five years time given to build smelters, only a few companies have begun processing facility projects, creating worries that the ensuing halt in ore exports will cause severe damage to the country’s economy.
In a hearing last week, the House Commission VII turned down the government’s proposal to give more time to mining companies that had proven their commitment to building smelters and allow them to continue exporting raw ore in 2014.
Members of the commission said mining companies have been given plenty of time already.
Marwan Batubara of Indonesian Resources Studies (IRESS) said firmer official statements were necessary to give certainty to the market about the implementation of the mining law.
“The President needs to make a statement that the government will ban exports starting Jan. 12, 2014. A similar statement is also necessary from the House following Commission VII’s stance because we cannot let their position change because of interests related to the 2014 election,” Marwan said.
The ban on unprocessed ore exports will deal a major blow to the mining industry, including big players such as PT Freeport Indonesia and PT Newmont Nusa Tenggara, which will have to shut down operations and send hundreds of workers home.
The two big companies have cooperated with local smelting firms to process copper concentrate they produce, however, the amount remains minor compared to total production.
Freeport Indonesia president director Rozik Soetjipto was quoted by Bloomberg as saying that the company might have to cut production to conform with the capacity of third parties’ smelters to absorb the products.
Energy and Mineral Resources Deputy Minister Susilo Siswoutomo said earlier that Freeport and Newmont may only able to produce 30 percent and 25 percent respectively in accordance with their supply to local smelters.
“They will only be allowed to send ore to PT Smelting [the smelting company that processes the ore] and supply the remaining as they won’t be allowed to export,” Susilo said.