One of Indonesia’s largest mining companies, PT Adaro Minerals Indonesia (ADMR), stated that it will focus on assisting Indonesia to advance the mineral downstream business by building an aluminum refining facility or smelter in North Kalimantan, which is targeted to start operating in Q2 2025.
This factory is located in Bulungan Regency, North Kalimantan with an area of 600 hectares (Ha) and was built by PT Kalimantan Aluminum Industri (KAI) which is a subsidiary of Adaro.
Investments to decrease import dependence
Adaro Minerals will be utilizing loans from banks and its own equity to fund the construction of the smelter. The planned fund composition is 30% to 40% equity, and 60% to 70% from bank funding.
“The total investment value, including the generator, is US$ 2 billion. Meanwhile, the alumina supply agreement will be finalized about 6 months before the commercial operation date,” said Totok Azhariyanto, Director of Adaro Minerals.
According to Christian Ariano Rachmat, the President Director of Adaro Minerals Indonesia, currently the need for aluminum in Indonesia is increasing. However, the country still relies on import to fulfill demands. Currently, the average domestic need for aluminum reaches one million tons per year.
“We want to build a 500,000 ton smelter. So, if the import price was US$ 2,500 per ton for one million tons, it means the value is US$ 2.5 billion. If we build a smelter, our import value will be halved,” said Rachmat on May 9, 2023.
Indonesia still imports aluminum
Currently, Indonesia can only produce raw bauxite, which is the raw material for aluminum. Thise raw bauxite then got exported overseas, where foreign companies will process them into aluminum, and then the aluminum will be imported by Indonesia.
“Bauxite will be produced into alumina which is the basic ingredient for aluminum abroad, then imported back into Indonesia,” said Rachmat.
In consideration of the above process, Adaro Minerals is hoping to accelerate the construction of existing aluminum smelters in Indonesia. The main goal of the company is to cut at least half of Indonesia’s aluminum needs of 1 million tons per year, and consequently reducing aluminum imports.
“Later, production [of the new smelter] will also be increased gradually up to 1.5 million tons per year,” Rachmat added.
The largest aluminum imports recorded in 2022 are as follows:
- China 268,900.3 tons;
- United States 68,310.4 tons;
- Australia 56,368.2 tons;
- United Arab Emirates 50,581.4 tons; and
- Malaysia 39,952.7 tons.
“Indonesia is forced to import aluminum and we are trying to reduce dependence on imports,” added Wito Krisnahadi, Director of Adaro Minerals Indonesia.
Development progress
The construction of the smelter is still ongoing. Adaro is currently preparing a Master Plan and Detailed Engineering Design and is in the process of securing related permits, including extending an environmental permit granted back in December 2021.
The plan will be carried out in three stages. In the first stage, a smelter will be built with a production capacity of 500 thousand tons per year with an estimated Commercial Operating Date (CoD) in Q1 2025. For the second stage, the company will increase the production capacity of the smelter to 500,000 tons per year and will be completed in Q4 2026. Then, the third stage will include the use of a hydro-power plant as an independent source of energy to support the smelter’s 500 thousand tons annual production.
“In the third phase, we are targeting this aluminum smelter to be fully operational in Q4 2029,” said Danuta Komar, Investor Relation Manager at Adaro Minerals Indonesia.
“The pre-construction stages for the aluminum smelter have also been underway, materials have been ordered and paid for, and the construction of a jetty for to support contstruction process has been carried out,” Rachmat added.
Contribution to market and industry
Furthermore, Krisnahadi conveyed that aluminum products from smelters will be prioritized to supply the domestic market with some sold to neighboring countries.
One of the domestic needs for aluminum, among other things, is that electric vehicles will use 30% more aluminum than vehicles with internal combustion engines. In addition, aluminum is the main materials for wind power plants and solar panels. A wind power plant requires 1 ton of aluminum for a single wind turbine, meanwhile, 4 billion tons of aluminum is required by the solar power sector until 2040.
Contribution to the country and society
In addition, the ongoing construction of the aluminum smelter plant will create 6,000 additional jobs for local workers, and 1,500 jobs for the operational phase.
Furthermore, the project can help the country by increasing tax revenue, state revenue and state foreign exchange reserves. In addition, aluminum production from this smelter will be valuable to support new and renewable energy businesses such as electric vehicles, wind power plants and solar power plants.
