Oct 22, 2012

Indonesia - Chinese businesses rush to Indonesia in lead up to mineral export ban

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Chinese investors and suppliers are flocking to Indonesia in the lead up to the archipelago nation's imposition of a ban on mineral exports in 2014.

Australian Mining reports that the approaching ban has drawn a wave of ambitious Chinese suppliers who confront a construction and investment slump back home, and are rushing to provision local miners who must raise their ore processing capability prior to the implementation of the looming export curbs.

Chinese investment in Indonesia has risen vigorously over the past several years on the back of the ASEAN-China Free Trade Area established in January 2010, which resulted in the world's third largest free trade zone, comprised of China and the ten South-east Asian member states of ASEAN.

Within a year of the free trade area's establishment Chinese investment in Indonesia rose 31.7% year-on-year to USD$2.9 billion.

Chinese firms are now investing heavily in smelters and refineries, as well as striving to supply the Indonesian resources sector with the machinery it needs.

Three Chinese firms recently announced investment of AUD$9 billion in Indonesian iron ore smelters and alumina refining plants, with Oriental Mining and Mineral Resources and Rui Tong Investment investing $1.5 billion in direct reduced iron plants, and Beijing Shuangzhongli Investment Management investing $7.1 billion in alumina refining plants.

Chinese suppliers of equipment such as pumps and heavy duty trucks also see promise in the Indonesian market, as they are able to out-compete Western rivals on cheaper prices.

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