20140114-巴黎银行证券-Mineral_ore_export_ban_–_a_cross_asset_view_11页_162kb

Summary of Asia Themes: Indonesia – Mineral Ore Export Ban

Core Content

Indonesia implemented a mineral ore export ban under Mining Law 2009, effective from 12 January 2014, in a diluted form. The law allows the export of processed concentrates based on purity levels, but imposes increasing export taxes over time. While copper concentrate exports are permitted, the ban effectively stops exports of nickel and bauxite ores, which were significant contributors to Indonesia's mineral exports in 2013.

Main Points

1. Impact on Exports

• In the 12 months ended November 2013, combined exports of copper, nickel, and bauxite amounted to USD5.6bn.
• Nickel and bauxite exports will be effectively banned due to their low purity levels compared to the legal requirements.
• Copper concentrate exports are allowed, but with export taxes that increase from 25% in 2014 to 60% by H2 2016.
• Other mineral ores such as tin, chromium, gold, and silver are also affected by the policy.

2. Current Account Impact

• The export ban is expected to create a drag on the current account of $0.3% of GDP in 2014.
• Despite this, the overall impact is in line with Barclays' expectations, and thus does not affect the 2014 current account forecast.
• Current account deficit for 2013 is revised to $3.5% of GDP from $3.8%, and for 2014 to $3% of GDP from $3.2%.
• The World Bank forecasts a $2.6% of GDP current account deficit in 2014 assuming no export ban.

3. FX Implications

• The IDR has been the best-performing Asian currency this week, partly due to the dilution of the export ban.
• However, fundamentals remain weak, with a large current account deficit, rising political risk, and concerns over FX reserves.
• Barclays forecasts for USD/IDR are 12,250 (1m) and 12,750 (3m), with a short-term stabilisation at 12,500 over a 6–12 month horizon.

4. Commodity Market Impact

• The ban is expected to increase nickel prices due to reduced supply and the need for Chinese producers to seek alternative sources or use lower-grade ores.
• Philippine nickel exports could benefit from the ban, but due to lower-grade ores, they may not be as competitive.
• Aluminium prices are expected to be less affected due to rising Chinese bauxite production.
• Chinese companies have stockpiled bauxite and are building alumina refining capacity in Indonesia to mitigate the impact of the ban.

5. Equity Research Insights

• The export ban is anticipated by major bauxite and nickel ore consumers, leading to pre-emptive stockpiling in China.
• China Hongqiao and other Chinese firms are setting up processing facilities in Indonesia to reduce dependency on raw material exports.
• Bauxite imports into China are expected to reach 70–80% from Indonesia, with annual imports potentially exceeding 70mn tonnes.
• Chinese users have stocked up nearly 25mn tonnes of bauxite ahead of the ban, equivalent to four months of consumption.

6. Policy and Market Outlook

• The ban aims to increase onshore value added, create jobs, and attract investment into processing industries.
• The implementation of the policy may affect the global supply balance, especially in nickel and aluminium.
• Indonesian ore grades are too low to meet the required purity levels for export, effectively banning nickel and bauxite exports.
• If the ban is relaxed in the future, the impact on global markets would be more limited.

Key Information

• Copper concentrate exports are allowed with minimum purity of 15% and increasing export taxes.
• Nickel and bauxite exports are effectively banned due to low purity levels.
• Chinese companies are building processing capacity in Indonesia to offset the ban.
• Nickel prices are expected to rise due to supply constraints.
• IDR has rallied due to diluted policy, but fundamentals remain weak.
• Current account deficit is revised downward due to improved trade performance in October–November 2013.
• Barclays' analysts have certified the objectivity of the report and provided important disclosures.

Figures and Tables

Figure 1: Main mineral ore exports (2013 data)

• Shows the purity levels and tax rates for various mineral exports.

Figure 2: Indonesia's current account deterioration

• Highlights the impact of the export ban on the current account deficit.

Figure 3: Required purity levels for ore exports

• Lists minimum purity levels for different minerals.

Figure 4: Tax rates on concentrate exports effective until 2017

• Provides tax rates for various minerals over the next few years.

Figure 5: China's nickel import sources

• Indicates Indonesia is the main supplier of nickel ores to China.

Figure 6: Indonesia forecasts a cut-off of domestic production

• Suggests a reduction in domestic production due to the export ban.

Figure 7: Recent spike in bauxite imports into China

• Shows the increase in bauxite imports from Indonesia in 2013.

Analysts and Contact Information

• Economics Research: Prakriti Sofat
• FX Strategy: Nick Verdi
• Commodities Research: Sijin Cheng, Gayle Berry, Nicholas Snowdon
• Equity Research: Ephrem Ravi

All analysts are members of the Fixed Income, Commodities and Currencies Research department and are not equity analysts.

Disclaimer

• This report is not an investment recommendation.
• Barclays may have conflicts of interest due to its business relationships with covered companies.
• Investors should consider this report as only one factor in making investment decisions.
• Important disclosures regarding research and trading activities are provided in the document.