All eyes on Indonesia

Indonesian naval forces appear to be intensifying patrols in response to a ban on the export of unprocessed minerals.
Indonesia's navy is one of the largest in Southern Asia.

Indonesia's navy is one of the largest in Southern Asia.

According to the Jakarta Post and other local media outlets the military is stepping up surveillance of ports and terminals in the Riau Islands and other regions to ensure commodities like nickel ore and bauxite are not shipped overseas.

The news, which follows reports that several bulkers have been detained as a result of the crackdown, may not come as a surprise since the ban was implemented just three days ago but it’s unclear how long the blockade will last.

Many industry observers expect to see an easement in the coming weeks since the government has struggled to enforce similar regulations in the past and has already issued three-year exemptions to more than 50 major mining conglomerates.

Some, like Benjamin Nolan of US investment bank Stifel, believe authorities will relax the regulations at some point down the road but fear the ban will have a devastating impact on panamaxes and supramaxes in the near-term.

Others are quick to point out that China, the primary destination for Indonesian nickel cargoes, would probably import less ore in the coming months anyways since it increased stockpiles in the final leg of 2013 in anticipation of the ban.

Mining industry researchers at Maybank believe it will take approximately nine months for Beijing to deplete its nickel inventories but admit it’s too early to say whether it will be forced to rely on other sources at that point in time.

In addition to Indonesia, a recent report released by the US Geological Survey indicates that nickel reserves in the Philippines are equally impressive. The agency also noted miners are ramping up production in the region in response to increased Chinese demand.

Data from a leading vessel tracking service shows that the 63,500-dwt Aeriko (built 2013), which was one of nearly a dozen bulkers detained by authorities at Indonesian ports two days before the ban was implemented, is now in China but it’s unclear if  the handymax was fully loaded upon arrival.

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Riau Islands