The Energy and Mineral Resources (ESDM) Ministry has urged bauxite producers to continue building smelters, despite the commodity has become the subject of an export ban, which took effect on June 10, 2023.
Energy Minister Arifin Tasrif has underlined that the ban will remain in place due to the lack of progress in bauxite smelter development.
“We expect collaboration from bauxite producers on the smelter construction. We are going to create added value for our commodities,” Arifin said on Friday (9/6). “You have been enjoying all the benefits of the industry, and leave the government with crumbs,” he added.
Slow progress in bauxite smelter construction
Despite the export ban, the government has decided to extend the export permits for copper for PT Freeport Indonesia and PT Amman Mineral Nusa Tenggara until May 2024, as the progress of smelter development by these two companies has exceeded 51 percent as of January 2023.
In contrast, the bauxite smelters’ construction has not shown significant progress. Minister Arifin noted that only four bauxite smelters are currently operating in Indonesia with a combined capacity of 13.9 million tons, but they have only produced 4.3 million tons of alumina so far.
These smelters are owned by PT Indonesia Chemical, PT Bintan Alumina Indonesia, PT Well Harvest Winning Alumina Refinery Line-1, and PT Well Harvest Winning Alumina Refinery Line-2.
Seven other bauxite smelter projects are still planning to build their own facilities, they are PT Quality Sukses Sejahtera, PT Dinamika Sejahtera Mandiri, PT Parenggean Makmur Sejahtera, PT Persada Pratama Cemerlang, PT Sumber Bumi Marau, PT Laman Mining, and PT Kalbar Bumi Perkasa.
However, the construction of PT Kalbar Bumi Perkasa’s smelter has been halted due to the revocation of its Mining Business License by the Investment Coordinating Board (BKPM), following the withdrawal of funding by investors.
Impact of ban on exports and revenues
The Energy Ministry estimated that the export ban will reduce bauxite exports by up to 8 million tons worth US$288.5 million this year and by 13.8 million tons worth US$494.6 million next year.
Although the ban will result in a decline of US$49.6 million in state revenue from royalties this year, the ministry expects an added value of US$1.9 billion from the bauxite ore processed by the existing smelters. This will yield a net benefit of US$1.5 billion for the government, along with the creation of 7,627 new jobs.
