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Jakarta Post

Smelting industry demands incentives amid price slump

  • Khoirul Amin

    The Jakarta Post

Jakarta   /   Sat, December 19, 2015   /  05:07 pm

Companies running mineral smelters and those developing them are demanding incentives from the government to help sustain their processing activities amid pressure from the slumping prices of their mineral products.

The incentives could be in the form of tax omissions when purchasing mineral ores or tax holidays for companies developing processing facilities, according to the secretary-general of the newly established Processing and Smelting Companies Association (AP3I), Haykel Hubies.

'€œWe want the government to provide [some sort of] fiscal stimulus to companies that are building smelters,'€ he said recently.

Haykel said the country'€™s smelter industry expected the government to be more active and aggressive in helping the industry so that the US$10 billion invested (by the association'€™s members) could be protected.

The smelter industry is currently facing pressure from two directions, the price slump and volatile currency exchange rates, he added.

A member of the association'€™s advisory council, Alexander Roemokoy, said it was now the time for the government to listen to business players, after previously requesting that they build smelters to provide added value for the country'€™s mineral products.

'€œWhat'€™s important now is [ensuring] that the companies can operate and earn profits so that they can pay taxes to the state. If they are subject to taxes in the first place, how can they earn [profits]?'€ he said.

According to Alexander, smelting companies currently have to pay various taxes and fees to the government, such as land and building taxes (PBB), ore taxes and royalties.

Indonesia, which produces around 30 million tons of bauxite a year, has prohibited companies from exporting mineral ores since 2014 and requires mining companies to build smelters by 2017.

While awaiting the completion of smelters in 2017, the government is only allowing semi-finished minerals, such as concentrate, to be exported.

According to the Industry Ministry, there are currently 16 smelters in operations and another six expected to commence operations next year. The processing facilities are for minerals including steel ores, alumina, copper and nickel.

A price slump for most minerals including nickel, bauxite and coal, is believed to be slowing down the development of smelters.

The price of nickel, for example, slumped to only US$3.89 per pound (lb) on Dec. 14, from more than $7 per lb a year earlier.

Industry Minister Saleh Husin said the government would keep supporting the development of mineral processing facilities, with the Finance Ministry issuing tax holiday facilities for new investments, including smelters.

'€œWe do hope that the government'€™s expectation of creating added value for our mineral products can materialize,'€ he said.

Saleh added that the development of the smelter industry would be a way to boost Indonesia'€™s export value in the next five or even 30 years.

Indonesia'€™s exports declined by 14.32 percent year-on-year (yoy) to $138.42 billion in the January-November period of this year, from $161.54 billion in the same period last year, hugely affected by the slump in commodities prices.

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