|
 In its six-month lobbying campaign last year, United Company Rusal
and Norilsk Nickel delivered a blunt message to Indonesian
officials: We will only invest billions of dollars in smelters if
you ban bauxite and nickel ore exports.
The effort seemed to have paid off, despite a denial by Indonesia
that it was influenced. When the law came into effect this year,
Indonesia enforced a water-tight export ban for only two major
minerals — nickel ore and bauxite.
The halting of $3 billion of annual nickel ore and bauxite exports
has already lifted the price of nickel and helped support aluminum,
boosting the fortunes of Rusal and Norilsk, the world's top aluminum
and nickel producers, respectively.
At the same time, it has strengthened the case for the pair to
invest billions of dollars in Indonesia to build smelters to replace
costly capacity in Russia, a key part of a recovery plan for
struggling Rusal and in line with Indonesia's own aims to earn more
from its minerals resources.
The mineral ore export ban is aimed at forcing miners to move up the
value chain by processing the minerals they dig up.
Rusal CEO Oleg Deripaska traveled repeatedly to Jakarta last year as
signs emerged that the government might water down the ban under
pressure from miners, and concerns over its impact on Southeast
Asia's largest economy.
"They made the export ban policy the main requirement for them to
invest here," Industry Minister Mohamad Hidayat told Reuters.
Just before the ban took effect on January 12, Indonesia conceded to
pressure from miners and made last-minute changes to the policy to
allow shipments of most metals to go on, but it did not relax the
policy for nickel ore and bauxite.
The supply cuts have already been a game changer for nickel, with
benchmark nickel prices soaring 17 percent to an 11-month high after
the ban, while starving global markets of bauxite that should help
curb China's huge aluminum expansion and support global prices.
This has benefited Rusal and Norilsk, whose shares have risen more
than 11 percent since the ban, though it has been at the expense of
big buyers such as China and Japan. It has also come at a price for
Indonesia which, despite gaining a pledge for a smelter, has
suffered mine closures and layoffs.
"Behind all of this is Rusal," said Tjandra Irawan, director of
Indonesia's Mineral Entrepreneurs Association. "What Rusal always
wanted was a total ban ... only then would they invest."
Indonesia's industry minister denied overseas firms played a role in
how the ban was implemented. Foreign influence on such a big
economic policy is sensitive in Indonesia, particularly with
elections looming in a few months.
Russian firms were, however, involved like no other foreign
companies in pushing their case — repeatedly sending executives to
Jakarta, organizing a conference to lobby officials, and teaming up
with influential industry players to push their case.
When asked about its lobbying strategy, Rusal said it was "closely
following the developments" in the months leading up to the ban
because of the uncertainty over how the government would implement
the law. Norilsk declined to comment.
SECOND THOUGHTS
Before the ban, Indonesia was the world's top nickel ore exporter
and the largest bauxite supplier to China, accounting for around 12
percent of the global market in both cases.
In February, Maxim Sokov, first deputy CEO of En+, the parent of
Rusal, said the ban was helping market prices of aluminum and nickel
turn upwards. Sokov is also a board member of Norilsk.
[to top of second column] |
Around the middle of last year, Indonesia began wavering on the
proposal due to fears a complete ore export ban would hurt the
economy and lead to widespread unemployment.
Government officials sought to reassure the mining sector that
the law would be diluted.
This worried Rusal, which has been struggling with weak aluminum
prices and mounting debt and saw the export ban as key to its
turnaround strategy, which included making Indonesia a regional hub
for its alumina production.
"Rusal and Norilsk were the only foreigners that seemed to be really
concerned about how the ban would be implemented," said a government
official close to the matter, who declined to be identified because
of the sensitivity of the subject.
China and Japan, both big buyers of Indonesian nickel ore, have been
concerned by the ban. Beijing is organizing a delegation of Chinese
firms to visit Jakarta to discuss the new rules, while Japan is
considering taking Indonesia to the World Trade Organization over
the ban.
RUSSIAN INVESTMENT
From June last year, Rusal's CEO went to Indonesia at least three
times in six months to push the government over the issue.
The Russian firms also teamed up with UBS and the Indonesian Chamber
of Commerce and Industry to hold a seminar in Jakarta in October
attended by top government officials.
The firms were especially worried about a proposal from the mines
ministry that could allow exports of unprocessed mineral ore to
continue for companies planning to build smelters.
The ministry dropped the proposal a month later after it was
rejected by parliament, though sought industry input on how to
implement the mining law without damaging the entire sector.
The export ban has also hurt U.S. miners in Indonesia.
Despite being allowed to continue exporting copper, Freeport-McMoRan
Copper and Gold Inc and Newmont Mining Corp have halted shipments
and cut output due to a dispute over an escalating export tax under
the new rules.
While U.S., Japanese, and Chinese firms have long been big investors
in resource-rich Indonesia, Russian firms are now pledging to
significantly lift their investment.
Rusal's Deripaska came with a big Russian business delegation to
Jakarta in February to sign a memorandum of understanding to build
an alumina smelter in West Kalimantan for an estimated $3 billion.
Russian Railways is also planning to invest $2 billion in a line to
East Kalimantan coal rail line.
(Additional reporting by Yayat Supriatna and Wilda Asmarini in
Jakarta, and Polina Devitt in Moscow; editing by Ed Davies)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
