Indonesia Mining Report

Providing expert analysis, independent forecasts and competitive intelligence on the mining.

Report includes: BMI Industry View, Industry SWOT Analysis, Industry Forecasts, BMI's Petrochemicals Risk Reward Index, Economic Forecasts, Company Profiles and Global, Regional and Country Industry Overviews.

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Indonesia Mining Report
Product Price
$1,295.00

BMI View: Indonesia's mineral production growth will remain slow on the back of heightened environmental protection, slowdown in the Chinese economy and continued mineral price weakness. The impending ban moderation on the export of mineral ores will provide some respite to production, especially in the case of bauxite , although uncertainty on the issue will rumble on.

Indonesia - Mining Industry Value Forecast (2012-2020)
2012 2013 2014e 2015e 2016f 2017f 2018f 2019f 2020f
e/f = BMI estimate/forecast. Source: BMI, UN Data
Mining Industry Value, USDbn 103.40 90.90 77.40 59.80 53.50 54.30 60.30 65.20 70.00
Mining Industry Value, USDbn, % y-o-y 3.15 -12.12 -14.82 -22.79 -10.49 1.50 11.09 8.04 7.46

Latest Developments & Structural Trends

Under current regulations, as of September 2016:

  • Minerals like copper, iron ore, lead and zinc are still allowed to be exported temporarily up to January 2017, to allow companies time to develop their smelters.

  • Bauxite and nickel ores, however, were not given this temporary allowance, and exports have been banned since January 2014.

Impact on exports in 2017 under current regulations:

  • Iron ore, copper ore, zinc and lead ore exports will be close to nil, as major smelter construction will not be completed by 2017, which means Indonesia will lose a large positive contributor to its GDP. As an example, major copper producers Freeport McMoran and Newmont Nusa Tenggara have yet to complete 15% of the construction of their respective smelters.

  • Nickel pig iron (NPI) smelters will come online and NPI exports will surge, along with nickel ore production.

  • Bauxite production will recover slowly with the completion of two smelters in 2015 and 2016, but there will be no rebound to previous highs. Alumina exports will begin with production from the two smelters, China Hongqiao Group and PT Indonesia Chemical Alumina, coming online.

The outlook for Indonesia's export policy in 2017 is uncertain, as the government has made no official announcement since it mentioned in February 2016 that it may revise the export ban by the end of the year. We have therefore laid out some scenarios regarding Indonesia's export policy:

  • Core scenario (55% probability): Indonesia will partly moderate its ban by allowing some nickel ore and bauxite exports, or delay the implementation for minerals currently holding temporary export permits, such as copper ore, iron ore, lead ore and zinc ore. This could be done towards the end of 2016 or in January 2017.

  • Maintenance of the status quo (30% probability): This means that the current regulations will remain in place and a full ban on all mineral ore exports, including the temporarily allowed minerals, will be implemented in January 2017 (see above for the impact on exports in 2017 under current regulations).

  • Complete relaxation (15% probability): This means that the mineral ore export ban will be revoked, and exports of all minerals will be allowed without any quota. This would not fare well for investors who have already invested in smelter construction in the country. Additionally, this poses upside risks to our production forecasts - particularly exports of nickel and bauxite, the two minerals without any temporary export allowance at present. As a result, this poses downside risks to prices of nickel and bauxite in 2017.

  • We expect the Indonesian government will push ahead with its February 2016 proposal to revise the country's mineral ore export ban by January 2017 as expected investment in the downstream sector has not materialised. The bauxite sector will benefit most from the relaxation of the ban, as the sector registered poor smelter construction and the greatest loss in revenues as a result of the ban. We expect our current production forecasts to face upside risks due to the impending ban moderation.

  • We forecast bauxite production growth in Indonesia to register an annual average of 148.2% during 2016-2020, mainly because of acceleration in production in 2016 of 600% due to China Hongqiao Group Limited's smelter facility coming online. Hongqiao will initially produce one million tonnes per annum of aluminium, doubling capacity by 2017. One tonne of aluminium requires approximately five tonnes of bauxite to produce. Contrary to numerous smelter project proposals in 2014 and our past expectations on high smelter investment from China, smelter investment for bauxite has been stagnant as a result of low prices and lack of funding. In March 2016 Hongqiao started trial runs in its new alumina smelter in Indonesia, adding to the only other smelter in the country, PT Indonesia Chemical Alumina, a subsidiary of diversified local miner PT Antam.

  • We expect Indonesia's coal production to fall by 15.0% to 314 million tonnes in 2016, followed by subdued growth henceforth to 2020, registering an average annual growth of 3.0% per annum during 2016-2020. Over the long term, despite the one time fall in domestic production due to the crackdown on illegal mining in 2015, we believe output will be supported by strong demand from a domestic pipeline of coal-fired power plants. Although emerging economies like the Philippines will continue to rely on Indonesian coal for power generation, a spate of piracy incidents in the last few months attacking Indonesian ships will undermine shipments in the upcoming quarters. Additionally, India's ramping up of domestic coal production will eventually reduce the country's reliance on Indonesian coal imports in the coming years.

  • We forecast Indonesia's copper mine production to grow at a steady pace, registering annual average growth of 10.7% during 2016-2020, compared to a decline of 17.8% during 2011-2015. We expect copper production to grow gradually in 2016 due to the resumption of copper concentrate exports from the major miners. In July 2014, the Indonesian Finance Ministry revised its rulings on taxation, with tax on copper concentrate exports being reduced from 20.0-25.0% to 7.5%. This export tax will decline to 5.0% when the progress on smelter development by mining firms exceeds 7.5%, and finally to 0.0% when smelter construction progress exceeds 30%. Currently, an outright ban on copper concentrate will come into place in 2017.

  • We forecast Indonesia's nickel ore production to grow by 15.0% in 2016 and by an annual average of 10.6% over the subsequent five years to 279 thousand tonnes (kt). The country's nickel production growth will be supported by a few nickel pig iron smelters coming online, including Tsingshan Sulawesi's nickel pig iron phase 2 project. Although numerous smelter projects had been planned since 2014, a lack of funding and low metal prices have resulted in a slow materialisation of smelter construction. The dwindling of Chinese high-grade ore stocks and the consolidation of China's domestic nickel industry coupled with the high demand for nickel will tighten the global market and provide support to nickel prices. Indonesia is set to take its place as one of the top exporters of nickel pig iron to China over the coming years.

  • We forecast that Indonesia's tin mining production will slow in the coming years due to a clampdown on miners and restrictions on offshore mining. We forecast Indonesia's tin mine production to register an annual average growth of 1.9% during 2016-2020, compared to 10.1% during 2011-2015. Tin production will be constrained in 2016 as registered tin exporters struggle to obtain the 'Clean and Clear' certification from the government which is a requirement in order to export tin from November 1 2015. Since January 2016, the country's largest tin producer, PT Timah Tbk, stopped production in Kelabat Bay after orders from the local governor in Bangka to halt offshore mining following complaints from fishermen and NGOs about environmental damage caused by dredging.

  • Without the relaxation of the ban moderation, the mining industry will not recover and continue to contribute to the country's economic slowdown. In 2015, Indonesian mining industry value shrank by 22.8% and we forecast a further 10.5% decline in 2016. Without ban relaxation we forecast the mining sector's contribution to GDP to decline to 4.6% by 2020, down from 11% in 2013 before the ban. Additionally, Indonesia's real export growth dipped to 4.6% in 2015 compared to 22.4% in 2013 before the ban. These poor macroeconomic indicators will ensure the Indonesian government moderates the ban on mineral ore exports as it has planned to do in order to improve economic growth.

BMI Industry View
7
Table: Indonesia - Mining Industry Value Forecast (2012-2020)
7
Latest Developments & Structural Trends
7
SWOT
9
Industry Forecast
11
Bauxite: Slow Recovery Without Ban Moderation
11
Latest Developments
11
Table: Bauxite Production Forecast (Indonesia 2012-2020)
11
Table: Indonesia - Major Bauxite Project
12
Structural Trends
12
Coal: Subdued Growth Ahead
16
Latest developments
16
Table: Coal Production Forecast (Indonesia 2012-2020)
16
Table: Indonesia - Select Coal Projects
16
Structural Trends
17
Copper: Steady Growth Ahead
24
Latest Developments
24
Table: Copper Production Forecast (Indonesia 2012-2020)
24
Table: Indonesia - Major Copper Projects
25
Structural Developments
25
Grasberg To Drive Output Growth
27
Nickel: Production To Rebound
28
Latest Developments
28
Table: Nickel Production Forecast (Indonesia 2010-2020)
28
Table: Indonesia - Select Nickel Projects
28
Structural Trends
29
Tin: Government Regulations To Slow Growth
32
Latest Developments
32
Table: Tin Production Forecast (Indonesia 2012-2020)
32
Table: Indonesia - Major Tin Projects
32
Structural Trends
33
Industry Risk Reward Ratings
36
Risk/Reward Index
36
Rewards
36
Industry Rewards
36
Country Rewards
36
Risks
36
Industry Risks
36
Country Risks
37
Asia Risk/Reward Index
37
Australia Stays On Top While India & Myanmar Gain
37
Shifting Scores Reflect Changing Sector Dynamics
38
Table: Asia - Mining Risk/Reward Index
39
Regulatory Development
40
Key Developments
40
Ban Moderation On The Horizon
40
Table: Indonesia - Export Restrictions On Select Commodities
41
The 2009 Mining Law
41
Trade & Investment Risk Analysis
43
Commodities Forecast
47
Commodities Outlook
47
Table: BMI Commodities Price Forecasts
47
Competitive Landscape
48
Key Players
48
Table: Financial Data For Key Mining Firms Listed In Indonesia
49
Company Profile
51
PT Antam
51
Table: PT Antam - Key Financial Data
53
PT Bumi Resources
55
Table: Bumi Resources - Key Financial Data
57
PT Indo Tambangraya Megah Tbk (ITMG)
59
Table: ITM - Key Financial Data
60
PT Timah
62
Table: PT Timah - Key Financial Data
64
Freeport-McMoRan
66
Table: Freeport McMoRan - Key Financial Data
70
Regional Overview
72
Continued Domination Of Iron Ore Production
72
Indian Coal Consumption To Outperform
73
China & India To Lead In Outbound Investment
74
Indonesian Ban To Continue
76
Methodology
77
Industry Forecast Methodology
77
Sources
78
Risk/Reward Index Methodology
79
Table: Weighting Of Indicators
80

The Indonesia Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.

BMI's Indonesia Mining Report provides industry strategists, service companies, company analysts and consultants, government departments, trade associations and regulatory bodies with BMI's independent forecasts and competitive intelligence on the mining industry in Indonesia.

Key Benefits

  • Use BMI's independent industry forecasts on Indonesia to test other views - a key input for successful budgeting and planning in this mining market.
  • Target business opportunities and risks in Indonesia's mining sector through our reviews of latest mining industry trends, regulatory changes and major deals, projects and investments in Indonesia.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity), Key Projects Tables and Competitive Landscape Tables.

Coverage

BMI Industry View

Summary of BMI’s key forecasts and industry analysis, covering mining reserves, supply, demand and prices, plus analysis of landmark company developments and key changes in the regulatory environment.

Industry SWOT analysis

Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the mining sector and within the broader political, economic and business environment.

BMI Industry Forecasts

Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:

  • Mining industry: Industry size (USDmn), real growth (%), % of GDP, employment (‘000), workforce as % of total workforce, average wage (USD).
  • Output: Production volumes (‘000 tonnes, carats etc.) for all major metals, minerals, ores and gems mined in each state, including bauxite, copper, gold, coal, lead, silver, tin, titanium, uranium, zinc etc.
  • Exports: Value of exports (USDmn) for all major metals, minerals, ores and gems mined in each state.
  • Commodity markets: Global demand, supply, stocks and benchmark prices (USD) for aluminium, copper, lead, nickel, tin, zinc, gold and steel.

BMI’s Mining Risk Reward Index

BMI’s Risk Reward Indices provide investors (mining companies and support service providers) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.

Competitive Landscape Tables & Analysis

Comparative company analyses and tables detailing USD sales, % share of total sales, number of employees, year established, market cap/NAV, ownership structure, production and % market share.

Key Projects

Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by metal/ore.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

Sources

The Mining reports are based on an extensive network of primary sources, such as multilateral organisations (UN, WB, IMF), national chambers of commerce and industry, national statistical offices, government ministries and central banks, and multinational companies.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.