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|20% Export Tax Levied On Indonesian Ni Ore|
|= Effective May 6, on 14 mineral products exported from Indonesia, causing increase in costs for China/Japan =|
The Indonesian government enforced an export tax system effective May 6, 2012 in which a 20% export tax is levied on 14 mineral products of Indonesian origin including nickel ore. As a result Japan and China, two major importers of the nickel ore from Indonesia, will be negatively affected, as their costs to produce nickel-bearing products (ferronickel in Japan and nickel-pig-iron in China) will inevitably increase.|
Furthermore, the export tax of 20% enforced this time is said only the first step towards the full ban of the exports of minerals from Indonesia scheduled in 2014. The government, on alert for export rushes before the entire ban of exports, will most probably increase the tax to 50% as the second step, followed by a total export ban of the minerals as the third and final step.
The government enacted in 2009 a law to ban exports of minerals from Indonesia for enforcement in 2014, followed by a ministerial decree from the Ministry of Energy and Mineral Resources on February 6, 2012 that stipulated an advanced enforcement of the law in May 2012. With the decree, it was understood by the relevant industries that exports of the 14 minerals would be banned in May, but the government apparently made a kind of compromise by imposing an export tax of 20% to start with, in order to cope with the objections from Indonesian mining industry and with the various opinions within the government about when and how to enforce the law.
An analyst says that the production cost of nickel-pig-iron (NPI) in China will increase by US¢50 - 70/lb if 20% of export tax is imposed. For reference, it is said that the total production cost of NPI has been US$8 - 9/lb, and the LME nickel price (3 months) on May 4 was US$7.92/lb. One thing to note is that the NPI's production cost can be reduced by 20 - 30% by introducing a new smelting/refining method adopting rotary kilns and electric furnaces (called an RKEF method), which is expected to fully absorb the cost increase in the ore. On the other hand in Japan there seems basically no room to absorb the cots increase in ferronickel production, as cost-trimming has gone already to the extreme. Therefore it is really challenging for ferronickel producers how to effectively minimize the impact.
From the nickel ores imported from Indonesia, the Philippines and New Caledonia, Japan produced 56,300 tons of ferronickel and China produced 250,000 - 300,000 tons of NPI in 2011. Japan imported 1.9 million tons of the ore (53% of Japan's total imports of nickel ore) from Indonesia in 2011, while China imported 25.71 million tons of the ore (also 53% of China's total imports of nickel ore) from Indonesia in 2011. However China's reliance on the Indonesian ore can be said much bigger, if the nickel ores imported from the Philippines, about 10 million tons in 2011, are excluded from China's imports of "nickel" ores, because the Philippine ores may have to be categorized in a sense as iron ores of low iron content.
A table showing Japan's ferronickel production and exports, together with imports of nickel ore by originating country is attached hereto.
|last modified : Fri 11 May, 2012 [10:54]|