New Mining Law of Indonesia: Construction of many Smelters Delayed

Earlier in 2014, several Indonesian mining industry players, including the Mineral Entrepreneurs Association (Apemindo), Harapan Utama Andalan, Pelayaran Eka Ivanajasa and Koperasi TKBM Kendawangan Mandiri requested the Constitutional Court of Indonesia for a judicial review of the 2009 Mining Law. This law includes the prohibition of mineral ore exports from Indonesia, instead forcing miners to refine minerals domestically first in order to add value to the export product. This export ban was introduced on 12 January 2014, although in a slightly looser form. If the mining company can prove that it is serious about building smelting facilities then exports of unprocessed minerals are temporarily allowed (until 2017), but the company will also need to face progressive export taxes (increasing from 20 percent in 2014 to 60 percent in mid-2016).

However, Director for Minerals at the Ministry for Energy and Mineral Resources Dede Suhendra, said that the ruling from the Constitutional Court will not come anytime soon as the institution is now busy with cases related to the 2014 elections. The court’s latest hearing regarding the 2009 Mining Law was held on 7 May 2014 but the date of the next hearing is not known yet. From the miners’ perspective, as long as there is no clarity about the matter, they would like to wait before spending a large quantity of money on the construction of smelting facilities.

Erry Sofyan, Secretary-General of the Indonesian Bauxite and Iron Ore Entrepreneurs Association, hopes that the government will provide room for the continuation of bauxite exports up to 2017. If miners will be allowed to export bauxite (an aluminium ore), they can use profits to establish the smelting facilities (to process bauxite into alumina).

Sofyan said that there are currently five companies that are constructing bauxite smelters, two of which - Well Harvest Wining Alumina Refinery and Bintang Alumina - are in an advanced stage. The remaining three - the Nusapati Group, Fajar Mentaya Abadi and the Gesit Group - are still in the early stages and have (temporarily) delayed further progress. Sofyan added that 51 bauxite producing companies have been forced to cease operations since January 2014 resulting in a total of 40,000 layoffs.

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