Miners exit Indonesia on export ban move

Indian mining and trading firms operating in Indonesia are gradually exiting the island nation, with that country contemplating a ban on iron ore exports. Indian miners have set up their operations in Indonesia, owing to its proximity to China, the biggest consumer of iron ore.

Five Indian companies, including three based in Bangalore, have mining and trading operations in Indonesia. Three of them have already initiated the process of exiting that country. Indonesia does not rank among the top-10 iron ore producers in the world. However, its proximity to China makes the country an attractive destination for Indian mining companies, which have supply contracts with Chinese steel mills.

S B Chauhan, adviser to the Federation of Indian Mineral Industries (FIMI), said Indian companies showed interest in Indonesia because of the business proposition. "Much of Indonesian ferrous mineral resources are not explored. This presents a good opportunity for Indian firms," he stated. Indonesian iron ore deposits have 62-68 per cent iron content. "It is the price margin of around $10 a tonne that makes supply of Indonesian iron ore attractive when compared with Indian iron ore," pointed out S K Lal, director, S L Mining Industries, which is engaged in iron ore trading from Indonesia.

According to the FIMI, Indian high-grade iron ore is priced at $63 a tonne, while medium-grade ore is priced at $60 a tonne. "In Indonesia, it is close to $52 a tonne of medium-grade iron ore. Besides, we also get to save on the transportation cost as Indonesia is close to China," Lal said.

The other mining companies, which are operating in Indonesia include Matha Minerals and Mineral Enterprises. Matha Minerals, which operates iron ore mines in Chitradurga and Tumkur districts of Karnataka, has secured a mining lease in Indonesia. "Inconsistent policies have stopped us from going ahead with expansion in Indonesia. We are no more exporting Indonesian iron ore to China," said Pradeep Wodeyar, director, Matha Minerals.

"Unlike Indian deposits, Indonesian iron ore deposits are a mix of hematite and magnetite. Also, the deposits are separated across huge areas without being concentrated in one area. So multiple mining leases have to be obtained for larger operations," Wodeyar stated.

Many other issues, including infrastructure such as transportation and port connectivity, are forcing Indian mining companies to pull out of Indonesia. "The road and railway network for iron ore transportation is poor in Indonesia. We did not receive our last consignment from that country. Most of the iron ore traders in Indonesia are not keeping the deadlines," said Basant Poddar, managing director, Mineral Enterprises.