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Constitutional Court in Indonesia Upholds Ore Shipment Ban

Indonesia’s Constitutional Court upheld today the country’s ban on exports of raw mineral ores imposed in January, rejecting a challenge from mining companies.

The court ruled the prohibition was acceptable to ensure ore supplies to domestic smelters. The Indonesian Association of Mineral Entrepreneurs and companies with mining business licenses filed a request in January to seek revision of articles in the 2009 law that formed the legal basis of the ban. Chief Justice Hamdan Zoelva said the ruling was final.

The country, the biggest producer of mined nickel and third-largest bauxite miner last year, banned shipments from Jan. 12, seeking to spur investment in domestic processing and transforming the nation into the producer of high-value metal. President Joko Widodo reaffirmed his commitment to the ban last month. Nickel and aluminum prices have climbed in London this year helped by the curbs.

“This will continue to act as a restraint on Indonesia’s export revenues, and therefore continue to adversely affect Indonesia’s balance of trade,” Luke Devine, foreign legal consultant, finance and projects, at Hadiputranto, Hadinoto & Partners, said by e-mail before the decision.

Nickel futures climbed 18 percent this year to $16,370 a metric ton, the biggest gainer among six base metals on the London Metal Exchange, while aluminum added 9 percent to $1,961.50 a ton.

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Erry Sofyan, secretary general of the Association of Indonesia Bauxite and Iron Ore Producers, told reporters they’ll discuss the curbs with the new government.

“We believe the government can come up with a wise policy,” Sofyan said. “The law mandated the government must control output and exports and we’re ready to be their partner. Indonesia has abundant metal reserves and there’s no need for the government to worry. We’ll present more accurate data.”

Mining companies and their associations are still pursuing challenges to the ban through the Supreme Court, Sofyan said.

The curbs have attracted about $18 billion in investment commitments, mostly from Chinese investors, to build processing plants, R. Sukhyar, director general of minerals and coal at the Energy and Mineral Resources Ministry, said in August.

Investors are planning to build six alumina refineries and 30 nickel smelters through 2017, according to ministry data.

PT Well Harvest Winning Alumina Refinery, a joint venture between China Hongqiao Group Ltd., Indonesia’s Harita Group and two partners, is building a $1.2 billion alumina plant on Borneo, while PT Sulawesi Mining Investment, a venture between Bintangdelapan Group and Tsingshan Holding Group is constructing a nickel smelter on Sulawesi island.
Source: Bloomberg