Indonesia tries keeping its minerals at homePublished by MAC on 2012-04-11
Source: Reuters, Jakarta Globe, Mining.com
Indonesia is considering imposing a hefty tax on mineral exports to curb over-exploitation of the country's resources, as companies scramble to beat a 2014 law requiring ores be upgraded on-shore.
It's a rational follow-up to the government's quasi-nationalisation of the mining industry, announced earlier this year. See: Indonesia says foreign miners must grant 51% ownership to domestic companies
Indonesia's proposed export tax has Indian power companies scrambling
By Andrew Topf
4 April 2012
Indonesia's proposed tax on mining exports is having a ripple effect on Indian power companies that buy fuel for coal-fired power plants.
Indonesia, with a population of 240 million, is the world's premier thermal coal exporter, a tin powerhouse and is also rich in gold and copper.
The 25% export tax on coal and other base metals, rising to 50% in 2013, is to stop mining companies from exploiting resources. Reuters quotes a government official explaining the rationale for the tax:
"Ever since we issued a mining law in 2009, miners have reacted by increasing their production multiple times, exploiting and exporting everything they've got," Thamrin Sihite, director general for coal and minerals at Indonesia's ministry of energy and minerals, told Reuters.
"This is dangerous and we need to curb that. We issued a ministerial regulation in February to ban unprocessed mineral ores and this new export tax regulation...We hope the tax will reduce the export rush further. But I can't tell you when it will be issued."
The proposal comes ahead of a raft of mining regulations by the Indonesian government, including a ban on export shipments of unprocessed metals and low-grade coal after 2014, and Government Regulation No. 24 - requiring all foreign mining companies to sell majority stakes in their mining operations to locals by the tenth year of production. The former is designed to spur investment in mineral processing, with Indonesia suffering a shortage of smelting capacity.
The Economic Times reports the coal export tax will have Indian power producers looking for cheaper sources of fuel for coal-fired plants:
"It's a setback for power producers. This will discourage them from taking up projects based on imported coal," said K Rajagopal, CEO for thermal at India's Lanco Infratech Ltd, which runs a 1,200 MW plant fuelled entirely by imported coal.
Twelve percent of India's coal is imported and 70% of those imports come from Indonesia. Last year Indonesia changed the way it prices coal, making nearly 10% of India's coal-fired capacity unviable, says Economic Times. The news site also quotes the (Indian) Association of Power Producers saying the export tax could make power unaffordable in India, and lead to a ramp-up in domestic coal production and a greater emphasis on renewable energy sources.
Indonesia eyes 25% coal/base metals export tax in 2012
By Yayat Supriatna and Michael Taylor
3 April 2012
JAKARTA - Indonesia plans to impose a 25 percent export tax on coal and base metals this year, jumping to 50 percent in 2013, an industry ministry official said on Tuesday, as the major producer of raw materials looks to boost domestic investment and take a bigger slice of mining profits.
If imposed the tax would add to a raft of regulations announced this year that have caused confusion in Indonesia's mining sector and worried foreign investors. It would hit the profits of both national and foreign-owned companies and could also raise costs for importers.
India, a major buyer of Indonesian coal, said it would raise concerns about the proposed tax with Jakarta.
Late last year, the world's top thermal coal and refined tin exporter outlined plans to introduce export taxes on metals and minerals, aiming to encourage downstream investment in the mining sector.
Talks on the export tax were put on hold last week however, with both the industry minister and energy and mineral resources minister due to discuss the plans, but details are emerging from talks within government departments.
It is hoped that introducing an export tax will prevent a deluge of mineral and metal ore shipments, as producers ramp up ahead of a planned 2014 ban, Industry Ministry Secretary General Anshari Bukhari told Reuters.
"We should actually impose the export tax early this year, so that the current export rush can be avoided," he said. "In 2013 we plan to increase the export tax to 50 percent."
Bukhari was unable to give an exact date for when the export tax would be introduced, but added that it would be imposed on miners' export sales.
Indonesia, whose fast-growing mining sector accounts for about 11 percent of GDP, already has export taxes in place for cocoa and palm oil, aiming to ensure domestic supplies and boost downstream industries.
Industry players in Southeast Asia's largest economy, were unsure about the export tax plans, having been left in the dark.
"I haven't heard anything about this," said Rozik Soetjipto, CEO at Freeport-McMoRan Copper & Gold's Indonesian unit, which runs the huge Grasberg copper and gold mine in Papua.
"I'm not sure whether it is true ... from the minister of mines, there is no indication of such a kind of tax. There is some suggestion from certain parties but I don't know exactly how it will go."
In January, Indonesia had said it would not impose an export tax on tin.
New Mining Regulations
The country has announced a series of new mining regulations this year, including a ban on exports of some unprocessed metals from 2014 and changes to rules on foreign ownership.
"This is one of many examples around the world where mining companies are making swillions, and everybody else involved wants a slice of the pie - whether it unions wanting higher wages or government wanting a bigger take of what is a national resource," said BNP Paribas metals analyst Stephen Briggs.
"It is not irrational," he added. "It sounds like this is adding up to a pretty chunky imposition on mining companies and it's hard to believe all of this would be pushed though."
The archipelago is home to the world's second-largest copper mine but only one copper smelter, and this smelting capacity shortage is mirrored for other metals.
Industry experts say it takes about eight years to build a new smelter and supporting infrastructure.
Despite industry pleas for a delay in the 2014 regulation, the government announced plans in February to ban exports of unprocessed copper, gold, silver, nickel, tin, bauxite and zinc by 2014. Coal will be regulated separately.
Analysts were surprised by the export tax plans, and sceptical that all the mining plans announced in recent weeks, would go ahead.
"Right now there appears to be very little clarity, there is talk of taxes, but when will they introduced?" said Citi analyst David Wilson in London. "There is talk of ore export bans, with confusion over whether bans will start as early as May, or by 2014, and then there is also the issue of majority local ownership for any mining operations.
"This confusion is not positive in terms of driving forward investment plans in Indonesia's mining sector."
Hayden Atkins, an analyst with Macquarie in London said while the tax on base metals was expected, the tax on coal was a surprise since there would likely be limited economic opportunities in "upgrading" coal anyway.
"If they did do it, it would definitely cause some ripples, particularly for Indian buyers," he said. "A 25 percent tax is huge. Nowhere else really has the same kind of tax burden on coal directly."
Indian Coal Secretary Alok Perti said such a move would push up the cost of imported coal just after New Delhi removed its own import duty on thermal coal for power plants.
"The government will take this up with Indonesia," Perti, the top official in India's coal ministry, told Reuters. "It will also nullify our efforts to help imports by removing the 5 percent import duty on thermal coal."
India is a major buyer of Indonesian thermal coal, along with China, South Korea, Japan and Taiwan.
Indonesian miners that could be impacted by an export tax include PT International Vale Indonesia PT, Adaro Energy PT, Aneka Tambang PT, Freeport McMoRan Copper & Gold Inc and Bumi Resources PT.
Benchmark copper prices on the London Metal Exchange were little-affected by Indonesia's export tax plans, holding near two-month highs after better-than-expected manufacturing data in China and the United States.
(Additional reporting Melanie Burton in LONDON and Rebekah Kebede in PERTH; Editing by Alex Richardson)
Indonesia hopes new mine tax will curb production boom
4 April 2012
JAKARTA - Indonesia's government is considering a hefty tax this year on mining exports to curb a production boom as miners are trying to overexploit resources before a 2014 law that will require raw ore to be upgraded, a senior government official said on Wednesday.
"Ever since we issued a mining law in 2009, miners have reacted by increasing their production multiple times, exploiting and exporting everything they've got...This is dangerous and we need to curb that," Thamrin Sihite, director general for coal and minerals at the mining industry, told Reuters.
Indonesia plans to impose a 25 percent export tax on coal and base metals this year, jumping to 50 percent in 2013, another industry ministry official told Reuters on Tuesday, one of a raft of regulations aimed at increasing government revenues that have worried global mining companies.
"We issued a ministerial regulation in February to ban unprocessed mineral ores and this new export tax regulation...We hope the tax will reduce the export rush further. But I can't tell you when it will be issued," Sihite added.
Doomsday Is the Theme as Nickel Miners Meet in Bali
Made Arya Kencana & Tito Summa Siahaan
29 March 2012
Denpasar. While students and unions protested a proposed fuel subsidy cut in the capital and other cities across the country on Thursday, a small group of nickel miners gathered on Bali to voice their own concerns.
Shelby Ihsan Saleh, chairman of the Indonesian Nickel Association (ANI), said there were 600 nickel miners at risk of collapse if the government went ahead with its plan to require that metal products be processed before being exported.
"It's impossible to do it," Ihsan said during the annual gathering of the association.
"There are 600 members of the association" that are on the brink of collapse now, he said. "There is one company that invested $4 million to $6 million."
The association is the latest mining interest to speak out against the government's plan to ban metal ore exports.
The Energy and Mineral Resources Ministry issued an order last month that goes into effect in May, instead of in 2014, that ores should be processed locally to boost state revenue. The ministry also issued a separate regulation that requires overseas companies to reduce their stakes in local ventures to 49 percent within 10 years of starting production.
"The regulation was introduced and was being discussed with the public. All of a sudden, we are required to build a smelter plant? How is that possible?" Ihsan said.
He said many nickel miners and businesspeople opposed the plan due to a lack of infrastructure, such as power plants in the eastern part of the country.
Ihsan said some nickel producers, including Vale Indonesia and Aneka Tambang, had their operations in Sulawesi and Maluku islands, areas in Indonesia's less developed east that lack a sufficient supply of electricity to power smelting operations.
Ihsan said about 80 percent to 90 percent of nickel producers operated in eastern Indonesia.
Indonesia sold 32 million tons of nickel ore, valued at $150 billion, last year to nations including China, Japan and some European countries, he said. Because of the new ore processing regulation, the government's target for $230 billion in exports won't be met this year, Ihsan warned.
"How can we sell to the export market if we cannot build plants?" he said.
One nickel plant employs about 300 workers, he said, so if the 600 nickel producers go out of business the country can expect massive layoffs and rising unemployment.
Ihsan said ANI was pushing for a judicial review of the ministry's regulation. "We demand a postponement of the implementation," he said.
Priagung Rakhmanto, an energy analyst at the Reforminer Institute, said the issue was not if the regulation would wipe out small miners, but rather to what extent it was actually implemented.
"The regulation could also spell the end for big miners should the government implement it thoroughly," Priagung said.
Large mining companies also lack sufficient smelting capabilities and would be affected by the regulation, he explained.
It's not the first time state regulation has raised concern among those in the mining industry.
A law passed in 2009 stipulated that new royalty fees were to be negotiated with mining companies, but the state has yet to settle new contracts with US-owned mining giants Freeport Indonesia and Newmont Nusa Tenggara.