Indonesia to ban bauxite exports in latest protectionist move

JAKARTA – Indonesian President Joko Widodo on Wednesday confirmed an export ban on bauxite starting in June 2023 as scheduled, to encourage domestic processing of a material used as the main ore source of aluminium.

The resource-rich nation has surprised markets with its commodity export policies, including brief but controversial bans earlier this year on shipments of palm oil and coal, of which Indonesia is the world’s biggest exporter.

It is also among the world’s top suppliers of bauxite, with China its key buyer. The timing of Indonesia’s ban, however, is in line with its current mining law.

The President said the bauxite ban aimed to replicate Indonesia’s success in developing its nickel processing capacity after halting exports of its raw form in January 2020, which enticed foreign investors, mostly from China, to build local smelters. The measure, which led to a dispute at the World Trade Organisation, also helped boost the value of Indonesia’s exports.

“The government will remain consistent in implementing downstreaming, so the value add can be enjoyed domestically for the country’s development and people’s welfare,” said Mr Widodo, emphasising the importance of job creation.

China was the biggest importer of Indonesia’s bauxite until Jakarta introduced a mineral export ban in 2014, which it lifted in 2017.

According to Mr Wen Xianjun, former head of the aluminium department at the China Nonferrous Metals Industry Association, Indonesia’s 2014 ban prompted China to boost its efforts to develop aluminium resources in Africa instead.

“Compared with then, China’s imports of bauxite are more diversified now,” Mr Wen said.

China imported 17.8 million tonnes of Indonesian bauxite in 2021, and 17.98 million tonnes in the first 11 months of 2022, about 15.6 per cent of its total imports, according to Customs data.

The announcement by Indonesia is not expected to have a significant impact on prices.

“It won’t cause any major supply headwind as Indonesia now accounts for only a relatively small share of China’s supply. Guinea and Australia will immediately make up the lost volume (after the ban),” an aluminium trader at a large trading house in China said.

Indonesia has four bauxite processing facilities with 4.3 million tonnes of aluminium output capacity, while more are under construction with collective capacity of nearly five million tonnes, said Chief Economic Minister Airlangga Hartarto.

Indonesia’s bauxite reserves are enough for up to 100 years’ production, he said.

The country’s mining law also states that exports of other unprocessed minerals such as copper will also be stopped. Mr Widodo did not specify the timing of shipment bans on the other materials. REUTERS