JAKARTA: Indonesia will impose a ban on bauxite exports from the middle of next year, the country’s latest move aimed at boosting domestic processing of its mineral resources.
Bauxite is an ore used to make aluminium. Indonesia is the world’s sixth‐largest producer and holds the fifth‐biggest reserves, according to a report by the United States Geological Survey (USGS). Exports of bleached bauxite will also 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,” President Joko Widodo said in a briefing broadcast on YouTube. 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 Indonesia would not follow a purely open economic model that he blamed for undercutting Latin America’s growth prospects for decades.
He also flagged on Wednesday that there are potentially more prohibitions on raw material shipments coming in 2023.
Aluminium rose 0.7% to US$2,390 a tonne on the London Metal Exchange as of 2.50pm in Singapore. The metal is used in everything from drinks cans to aircraft and refrigerators.
The bauxite ban could drive up prices in the short term due to the disruption, said Yi Zhu, a senior analyst for metals and mining at Bloomberg Intelligence. Supplies from Indonesia accounted for 16% of China’s total imports this year through October and, with the country increasing purchases from Guinea, the impact on the aluminium industry there is likely to be limited, she said.
- Copper concentrate -
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 world’s second-biggest copper mine, from international mining companies including Freeport-McMoRan Inc in 2018.
Indonesia has halted bauxite exports before. A ban in 2014 hit China’s aluminium 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. The World Trade Organization (WTO) ruled last month that Indonesia’s ban on nickel ore exports violated international trade rules following a complaint by the European Union (EU). Jakarta is appealing the decision.
The bauxite ban “is unlikely to have any material impact” on the market, since Indonesia produced less than 5% 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 unfavourable global demand outlook for non-ferrous metals will also limit the impact of Indonesia’s move, Roy said.
