Indonesia, a key player in the global copper market, has decided to push back its planned ban on exporting copper concentrate until the end of next year. This move is expected to impact global copper prices which recently reached an all-time high.
The government of Indonesia is encouraging local copper mining companies to enhance their operations by setting up smelters that process the raw copper locally. This strategy is designed to boost the country’s economy by producing higher-value copper products essential for modern clean energy technologies and upgrading power grids.
Two leading copper mining firms in Indonesia, Freeport Indonesia and Amman Mineral, were initially scheduled to start processing copper in their newly constructed smelters by May 2024. They had received permissions to export copper concentrate until May 31st.
However, with the new smelters not yet at full capacity, the Indonesian Trade Ministry has issued a temporary permit allowing these miners to continue exporting copper concentrate. The permit now extends until their operations are fully capable of processing the copper domestically, a deadline which has been moved to December 31, 2024.
This delay in imposing export restrictions could potentially dampen market optimism in the copper sector. Despite copper prices surging recently, reflective of anticipated shortages, the actual market fundamentals, particularly out of China, appear weak. This is highlighted by rising copper stocks on the Shanghai Futures Exchange, which notably exceed the usual seasonal averages, presenting a less supportive market outlook in the near term.
Despite these market dynamics, various commodity strategy heads and strategists have noted that the significant rise in copper prices seemed disproportionate to the current market fundamentals, suggesting an adjustment might be forthcoming.