Indonesia is to ban bauxite exports from the middle of next year, its latest move aimed at boosting domestic processing of its mineral resources.
Bauxite is an ore used to make aluminum. Indonesia is the world’s sixth-largest producer and holds the fifth-biggest reserves, a US Geological Survey report said. Exports of bleached bauxite are also to be banned.
“Starting from June 2023, the government will impose a ban on exports of bauxite ore and push for development of processed bauxite in the country,” Indonesian President Joko Widodo said in a briefing broadcast on YouTube.
Photo: Reuters
This means the “added value is enjoyed in the country for the progress and welfare of the people,” he said.
Southeast Asia’s largest economy has been pursuing policies designed to create jobs and revenue by processing more of its natural resources at home, rather than just shipping out raw materials.
Jokowi, as the president is known, said this month that Jakarta would not follow a purely open economic model that he blamed for undercutting Latin America’s growth prospects for decades.
Yesterday, he also flagged that there are potentially more prohibitions on raw material shipments coming next year.
Aluminum rose 0.7 percent to US$2,390 a tonne on the London Metal Exchange as of 2:50pm in Singapore yesterday. The metal is used in everything from beverage cans to aircraft and refrigerators.
The Indonesian government has also previously flagged a possible ban on copper concentrate exports, which could hit a global market facing a large shortfall in supply as the energy transition gathers pace.
Indonesia wrested control of Grasberg, the second-biggest copper mine in the world, from international mining firms, including Freeport-McMoRan Inc, in 2018.
Indonesia has halted bauxite exports before. A ban in 2014 hit China’s aluminum industry hard, as it relied on the Southeast Asian nation for about two-thirds of its overseas supply at the time.
Chinese smelters responded by investing heavily in diversifying their sources of the mineral, particularly from Guinea.
Jakarta has already prohibited nickel ore exports. That has spurred Chinese companies to invest billions of dollars to set up operations on the islands of Sulawesi and Halmahera, where they have built refineries, smelters and a metallurgy school. The value of the country’s nickel exports has since surged.
Still, the move has triggered opposition from importing nations. Following a complaint by the EU, the WTO last month ruled that Indonesia’s ban on nickel ore exports contravened international trade rules. Jakarta is appealing the decision.
The bauxite ban “is unlikely to have any material impact” on the market, as Indonesia produced less than 5 percent of global supplies of the mineral last year, said Jayanta Roy, senior vice president at ICRA Ltd, the Indian unit of Moody’s Investors Service.
“This deficit can potentially be bridged by other large producers like Australia and Guinea,” he said.
The unfavorable global demand outlook for non-ferrous metals would also limit the impact of Indonesia’s move, Roy said.
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