Energy and Mineral Resources Ministry data from Jan. 20 showed that 2022 would see the highest one-year increase in new smelter units since at least 2015, a year after Indonesia introduced a regulation to ban all raw metal exports.

The seven smelters comprise two nickel, one lead, one zinc, one alumina and two iron smelters, some of which were carried over from last year. These new facilities would bring the total number of operational smelters in Indonesia to 28 by the end of the year.

“[Development] of the downstream industry and increasing added value are mandated by the law,” said energy ministry Mining Director General Ridwan Djamaluddin.

Smelter construction is part of the government’s larger scheme to foster downstreaming in extractive industries to grow the economy. To achieve this, regulators have permanently banned exports of nickel ore and plans to enact similar bans on bauxite and raw copper starting June 2023.

Indonesia, formerly the world's top nickel ore exporter, shook global markets with its export ban. The European Union has brought Indonesia to the World Trade Organization to challenge the ban.

Indonesia is expected to have 53 smelters in total by 2024 to create a sizeable enough market to absorb the excess domestic metal ore supply.

Recently, President Joko “Jokowi” Widodo said he wanted to speed up the bauxite export ban to this year.

Read also: Jokowi wants to speed up bauxite export ban

Processing and Smelting Companies Association (AP3I) chairman Prihadi Santoso urged the government to review import duties and fiscal incentives to make domestically refined metals competitive with imported variants. This was necessary to incentivize downstreaming.

“I’m [optimistic] the seven smelters targeted for this year can be completed,” Prihadi said on Monday.

He went on to say that the government needed to provide fiscal incentives and affordable energy prices to ensure the smelters were economical.

Read also: Indonesia to formulate grand strategy for nickel industry

“The government has to prepare Indonesia’s domestic market to absorb downstream [mining] products,” said Komaidi Notonegoro, Reforminer Institute executive director, on Monday.

Delayed projects

Indonesia only added two new smelters of the four smelters targeted to come online last year.

Only one smelter, owned by PT Cahaya Modern Metal Industry in Banten fulfilled the construction target in 2021. Meanwhile, the other smelter, owned by PT Halmahera Persada Lygend in North Maluku, finished a year earlier than expected. 

The three smelter projects that missed the target are owned by PT Kapuas Prima Citra in Central Kalimantan, PT Aneka Tambang (Antam) in North Maluku and PT Smelter Nikel Indonesia with construction progress reaching 99.8 percent, 99.7 percent and 98.7 percent as of last week, respectively.

Among the three upcoming smelters, the largest one by output is the nickel smelter of publicly listed diversified miner Antam. The smelter, last valued at US$1.6 billion, will produce 64,655 tons of ferronickel each year.

Four other smelters targeted for completion in 2022 are owned by PT Kobar Lamandau Mineral, PT Well Harvest Winning, PT Alchemist Metal Industry and PT Sebuku Iron Lateritic Ores. The smelters will produce zinc ingot, smelter-grade alumina, pig iron and sponge ferroalloy, respectively.

Energy ministry data show that ferronickel, nickel pig iron and nickel matte production reached 1.5 million tons, 799,600 tons and 82,300 tons last year, respectively. While ferronickel production saw an 8.4 percent increase year-on-year (yoy), nickel pig iron and nickel matte production declined 7 percent and 10 percent, respectively.

“Declining nickel pig iron and nickel matte production were due to PT Vale's furnace rebuild and [operational] restrictions at other smelters because of the pandemic,” Ridwan said, referring to publicly listed nickel miner PT Vale Indonesia.

Investment in the mining sector reached $4.53 billion, exceeding the $4.3 billion target set for 2021. Meanwhile, the investment target for 2022 saw a slight increase to $5.01 billion.