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China, RI sign $695m deal for W. Kalimantan alumina smelter
Indonesian and Chinese companies have signed a US$695 million contract to construct the Mempawah alumina refinery in West Kalimantan, as Indonesia moves to add value to its mineral products and create a domestic mining industry value chain
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span>Indonesian and Chinese companies have signed a US$695 million contract to construct the Mempawah alumina refinery in West Kalimantan, as Indonesia moves to add value to its mineral products and create a domestic mining industry value chain.
Indonesian state-owned construction firm Pembangunan Perumahan (PP) and China Aluminum International Engineering Corporation Limited (CHALIECO) signed the contract on Jan. 11 in Beijing with the smelter’s owner, Borneo Alumina Indonesia (BAI). Construction of the facility is expected to be complete by 2022.
Smelter construction began in December 2019, although BAI’s shareholders initially expected it to begin in late 2018 to meet a 2021 completion date. BAI is a joint venture between the Aluminum Corporation of China Limited (Chalco), state-owned aluminum producer Indonesia Asahan Aluminium (Inalum) and state-owned mining company Aneka Tambang (Antam).
“There was a procedural problem,” Inalum corporate secretary Rendi Witular told The Jakarta Post on Thursday in regards to the construction delay, without elaboration.
Once operational, the Mempawah smelter is expected to produce 1 million tons of alumina each year, at least half of which is to be sold to Inalum. It would replace the state-owned company’s $500 million worth of annual alumina imports. Inalum would then process the alumina into 250,000 tons of aluminum ingots each year for both domestic consumption and export.
Indonesia aims to gain more bang for the buck with its mineral wealth and, thus, the Energy and Mineral Resources Ministry issued a regulation in 2017 that bans the export of all metal ores, except nickel, starting January 2022. The ban forces mining companies to domestically refine such ores, thereby producing higher-value commodities.
An Indonesian counsel to China, Victor S. Hardjono, who witnessed the signing ceremony in Beijing, said in a statement on Jan. 15 that the smelter represented a “long-time dream” of Southeast Asia’s largest economy “to develop an independent aluminum refining industry”.
Inalum usually exported bauxite to China and Australia and then imported the alumina extracted from the bauxite to make aluminum, according to former president director Budi Gunadi Sadikin.
“That is hilarious right?” said Budi, who is now the state-owned enterprises (SOEs) deputy minister.
Inalum, now rebranded as mining holding company MIND.ID, imported 500,000 tons of alumina last year and would, thus, save about $500 million in foreign exchange earnings once the smelter begins operations, added Rendi.
“The $850 million project will also stimulate Mempawah [regency] and West Kalimantan to become a new economic center,” the corporate secretary said.
For the time being, Indonesia has only one smelter-grade alumina refinery — whose alumina is suitable to produce aluminum instead of paint and ceramics. The smelter, located in Ketapang, West Kalimantan, and owned by China-Indonesia joint venture firm Well Harvest Winning, can also produce 1 million tons of alumina each year.
Eight other smelter-grade refineries are slated for completion by 2021, according to recent energy ministry data. Once completed, the smelters are to produce 8.73 million tons of alumina each year. However, all of them — including BAI’s Mempawah smelter — were less than 40 percent complete as of December last year.
“If the smelters are behind in progress, we can help them find funding but will also give a warning,” said the energy ministry's mineral business development director, Yunus Saefulhak.
The ministry plans to bring in local and international financiers, state-owned enterprises or international mining companies to invest in Indonesia’s smelter projects.
Counsel Victor said the Mempawah agreement was also “the first China-Indonesia agreement signed in 2020” as reported by Antara.
China, which was Indonesia’s second-largest foreign investor last year, adds to a list of countries, including Japan and the United States, that President Joko “Jokowi” Widodo’s administration is approaching to secure $137 billion for infrastructure projects, most of which are energy-related.
