Deputy of Investment and Mining of the Coordinating Ministry for Maritime and Investment Affairs Septian Hario Seto, said that Singaporean financial institutions have becoming more and more aggressive in disbursing smelter financing to Indonesia this year.
“Lately I’ve been seeing Singapore banks becoming more aggressive in funding downstreaming projects in Indonesia, domestically, there are probably only four or five banks that have the capability of such downstreaming funding,” Seto said on Monday (12/6).
The funding provided by Singaporean banks follows the credit commitment provided earlier by Chinese financing institutions for nickel smelter projects since an export ban on the commodity was imposed back in 2020.
Seto added the foreign funding commitment was copied by several domestic banks. He hoped that financial institutions can provide more intensive credits to fund massive funding needs of smelter projects.
Cost of smelter construction
On average, the construction of one unit of smelter can range from US$1.2 billion to US$1.4 billion. Currently, the capital composition of domestic companies mostly consists of 30% company funds, an 70% loan.
“On average, based on my view, domestic companies involved in downstreaming projects have established good relationship with domestic banks or Singapore banks, so far they do not need assistance from the government,” Seto said.
Role of government investment
On the other hand, Executive Chairman of the Indonesian Bauxite and Iron Ore Businesses Association Ronald Sulistyanto, said that the government’s investment in the bauxite ore processing business is important in the midst of a lack of trust from investors and financial association.
“Even state-owned banks association [Himbara] said the project is not feasible, let alone foreign banks,” Ronald said bank on January. Ronald asserted that the government’s involvement to invest more in smelter projects will help to improve and lower the project’s risk factor.
