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AISI Comments on Indonesia Nickel Ore Ban Export

Steel News - Published on Tue, 21 Jan 2020

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In response to a request from the Office of the United States Trade Representative, the American Iron and Steel Institute, on behalf of its US producer member companies, has submited comments to USTR on its country practice review for Indonesia market access under the Generalized System of Preferences. AISI said “US stainless steel producers are extremely concerned that without intervention by the US government, Indonesia’s market-distorting behavior will ultimately force the shutdown of critical domestic stainless steelmaking operations and leave the United States reliant on foreign sources for producing stainless steel vital for the US industrial and defense industries. As USTR reviews Indonesia’s market access compliance with its GSP commitments, AISI urges it to take into account the manipulation of the nickel market by the Indonesian government as it considers the continued eligibility of Indonesia under the Generalized System of Preferences. Given in particular the Indonesian government’s direct actions to limit market access to its nickel ore, a basic commodity resource, AISI is of the view that Indonesia no longer meets a key statutory criterion for GSP beneficiary country status.”

According to the US Geological Survey, in 2018, Indonesia was the world’s largest mine producer of nickel, while also holding the largest nickel ore reserves in the world. As part of a national plan to develop certain downstream industries, including in particular stainless steel, Indonesia in 2014 imposed a complete ban on the export of unprocessed mineral ore exports, including nickel ore. In 2017, the government of Indonesia partially relaxed this export prohibition by issuing a set of rules allowing companies that meet certain stringent requirements to export mineral concentrates, including certain amounts of low-grade nickel ore with a concentration of less than 1.7 percent nickel (subject to an export tax of ten percent),6 with the stated plan to reintroduce a total export ban on nickel in January 2022.7 In August 2019 Indonesia’s Ministry of Energy and Mineral Resources announced that it was reinstating the total export prohibition for all nickel ore as of January 1, 2020. hese measures have caused a very significant drop-off in Indonesian nickel ore exports beginning in 2014, as detailed in the chart below.

A major beneficiary of the Indonesian export restrictions on nickel has been the Chinese stainless steel producer Tsingshan Holdings Group (Tsingshan). In August 2017, Tsingshan opened a stainless steel mill in Indonesia with the primary purpose of exporting stainless steel to other markets around the world, including in particular the United States and the European Union, as Indonesian consumption of stainless steel products is significantly below the annual production capabilities of this facility. Tsingshan invested USD 6-7 billion to build the 3.0-3.5 million metric ton production facility in Morowali, Indonesia,8 which was heavily promoted and sponsored by the Indonesian government and was financed as part of the Chinese government’s ‘Go Global’ and subsequent ‘Belt and Road Initiative’ programs. Indonesia’s total stainless steel production capacity is expected to expand to over 50 times its annual 200,000 metric ton domestic demand by 2025, and thus production in Indonesia is almost entirely intended for export. Moreover, this investment in Indonesia is in addition to Tsingshan’s stainless steel production capacity of 7.0 million metric tons in China, providing the company with a total stainless steel production capacity of 10 million metric tons, nearly 20 percent of global stainless steel demand.

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Posted By : Rabi Wangkhem on Tue, 21 Jan 2020
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