Indonesia’s mining giant plans to invest billions in expanding aluminium smelting

Indonesia is reportedly planning to spend billions of dollars in building aluminium and nickel smelters and reshaping its mining industry, in a bid to cut decades-long dependence on costly imports to meet domestic demand. Report says the Southeast Asian country is seeking to make building smelters mandatory for the miners.

The state-owned first and largest SOE engaged in aluminium smelting, PT Indonesia Asahan Aluminium (Inalum), will designate a fund of $10 billion over the next five years to develop refineries and smelters, said President Director Budi Gunadi Sadikin.

According to Sadikin, the company is investing $850 million in building a smelter-grade alumina refinery with1 million tonnes capacity in West Kalimantan. This refinery once completed, is expected to help reduce the country’s 500,000 tonnes of alumina imports each year.

“The refinery will use Indonesia’s abundant bauxite supply,” Sadikin said in an interview at his office in Jakarta on July 16. “This is an energy-intensive industry. We can benefit from abundant water supply and construct hydropower plants.”

Besides, Inalum is planning to enhance the capacity of its Mempawah refinery to 2 million tonnes and export half the output. It also plans to boost its aluminium production capacity, which is currently at 250,000 tonnes, to 2 million tonnes by 2035.

Plans to enhance copper and nickel mining are also on the plate. Sadikin said Inalum was seeking to expand copper mining and compete with mining majors such as Rio Tinto Group, United Co. Rusal, and Aluminium Corp of China Ltd. The company is also close to sealing a deal with nickel miner PT Vale Indonesia to acquire a 20% stake, and this purchase may help tighten its grip in nickel production.

Inalum is seeing a rising demand for aluminium from its clients, whose operations span from automotive to construction. State electricity company PT Perusahaan Listrik Negara is seeking aluminium as light-weight transmission cables. PT Toyota Motor Manufacturing Indonesia, on the other hand, has already placed an order for aluminium for its car rims, according to Sadikin.