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Indonesia sees 2014 mineral output falling 'drastically'

By Wilda Asmarini JAKARTA, Dec 27 (Reuters) - Indonesia's production of metal ores is expected to fall "drastically" due to a ban on unprocessed mineral exports set to begin in January, a government official said, as there is insufficient smelting capacity to absorb the volumes of base metal ores the country produces.

From January 12, mining companies must process their ore before shipping it overseas under a measure which aims to boost the value of exports from Indonesia, the world's top exporter of nickel ore, thermal coal and refined tin.

"Ore production will fall drastically next year due to this ore export ban," Sukhyar, the country's newly appointed director general of coal and minerals, told reporters in Jakarta on Friday.

"We hope (by) 2016 all ore will be processed in domestic smelters." Ministry figures forecast that Indonesia's nickel and bauxite production in 2014 will be slashed by 78 percent and 97 percent respectively.

Tin production, while unaffected by the export ban, has also slowed as a result of trading rules introduced this year which force producers to trade via a local exchange.

Coal production, also unaffected by the ban, climbed by around 3 percent above full-year 2012 figures to more than 420 million tonnes in the first 11 months of this year.

Production of most ores increased in 2013 as buyers stocked up ahead of the 2014 ban, Sukhyar said, noting that copper and gold production had declined as a result of a temporary closure at the massive copper mine in Papua run by Freeport-McMoRan Copper & Gold Inc.

"The philosophy of this mineral law is to create added value. So, ore should be processed and then refined. We are now preparing a ministerial regulation to specify mineral contents in processing and refining," Sukyar said, adding that existing regulations on processing requirements would be revised.

Earlier on Friday Southeast Asia's largest economy announced it would revise processing requirements in a move expected to allow exports to continue for copper concentrate producers Freeport and Newmont Mining Corp while stopping unprocessed ore exports.

The director general also said 253 mining companies had committed to processing and refining minerals domestically before 2014, but only 178 of them appeared to be serious about building smelters.

"Among the 178 companies, 25 have completed between 80 and 100 percent of construction, and the rest are still carrying out feasibility studies, environmental impact assessments and construction." The total investment committed for these more serious projects reached $17.4 billion, he said, of which around $6 billion has been realised already.

The following table shows targetted production for various minerals for 2014 compared with realised output for 2012 and the first 11 months of 2013.

Coal and mineral production plan (in tonnes) 2014 2012 change 2013 (target) (full year) (YOY) Jan-Nov Copper 370,000 448,000 -17% 370,000 Gold 63 75 -16% 39 Tin 42,000 95,000 -56% 44,000 Nickel 9,000,000 41,000,000 -78% 47,000,000 Bauxite 1,000,000 30,000,000 -97% 47,000,000 Iron ore 10,000,000 10,000,000 0% 15,000,000 Coal 397,000,000 407,000,000 -2% 421,000,000 Coal (exports) 324,000,000 304,000,000 7% 293,000,000 Coal (consumption) 73,000,000 90,000,000 -19% 89,000,000 Coal (domestic 95,600,000 67,300,000 42% 55,000,000 market obligation)