The ban on bauxite exports, which will come into force on June 10, 2023, has shown its impact on the bauxite mineral commodity as smelter projects remains stagnant. Businesses are faced with finance problems resulting in the halted construction of bauxite smelters.
Funding constraints and role of government
According to the Executive Chairman of the Association of Indonesian Bauxite and Iron Ore Entrepreneurs (APB3I), Ronald Sulistyanto, businesses require capital expenditure (Capex) of US$1.2 billion to build a bauxite smelter unit.
The number is much higher compared to a nickel smelter. In addition, Sulistyanto also mentioned the difficulty of obtaining funding from both Indonesian banks and foreign banks.
“Even Indonesian banks refused [to give fund], let alone foreign banks, they are even more afraid,” Sulistyanto said on May 25, 2023.
Comparison of monetary values of bauxite and mineral resources in Indonesia in 2021 are as follows:
- Copper IDR 673.5 trillion;
- Bauxite IDR 212.1 trillion;
- Tin IDR 115.6 trillion;
- Nickel IDR 62.7 trillion;
- Silver IDR 6 trillion.
Sulistyanto encourages the government to provide around 25% financing for the bauxite factory. Because, their main investor, China, is having financial difficulties.
“The Covid-19 pandemic has had an impact on investment countries, namely China. They are also experiencing financial problems,” said Sulistyanto.
Stagnant smelter projects and operating smelters
The Ministry of Energy and Mineral Resources (ESDM) noted that seven smelter projects have yet to be built, including projects owned by 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.
One of the projects, the Kalbar Bumi Perkasa smelter, was halted because investors stopped funding after the mining business license was revoked by the Investment Coordinating Board (BKPM).
Meanwhile, there are four bauxite smelters that are already operating. These smelters are oned by PT Indonesia Chemical Alumina, PT Bintan Alumina Indonesia, PT Well Harvest Winning Alumina Refinery Line-1, and PT Well Harvest Winning Alumina Refinery Line-2.
Additionally, there is also an advanced processing smelter operated by PT Indonesia Asahan Aluminum (Inalum).
“The smelter [development] based on permits from the Ministry of Energy and Mineral Resources are all halted,” said Sulistyanto.
Difficulties to obtain relaxation of bauxite export ban
The Ministry of Energy and Mineral Resources did not provide relaxation on the ban on bauxite exports because there has been no progress in constructing refining facilities.
Seven of the eight smelter development project plans are still in the form of empty land, so the ban on bauxite exports cannot be enforced in accordance with the Minerba Law.
In dealing with this situation, cooperation between business actors and the government is needed to accelerate the construction of a bauxite smelter and ensure adequate financing and regulatory certainty to support the development of the downstream bauxite sector in Indonesia.
