Chinese companies vigorously enter Indonesia's aluminum industry

The chairman of the Indonesian Bauxite Association said that some Chinese companies are entering the Indonesian aluminum industry through industrial operating licenses (IUI), a form of investment that is not an integrated smelter.Investment in stand-alone smelters is relatively easy and simpler than integrated investments that start upstream from the mining industry. Some bauxite refinery to aluminum smelter projects are currently difficult to finance, and some investors are on the fence about investing in the bauxite sector. The Ministry of Energy and Mineral Resources (MEMR) has recorded 10 smelters that have not yet completed their projects with mining operation production licenses (IUP OP), which require integrated investments from upstream of the mining industry to the refinery and smelter. Only two companies have completed smelter construction, PT Well Harvest Winning Alumina and Smelter Grade Alumina Refinery (SGAR) in Muangkabeiksha, West Kalimantan.The 10 smelters that have been fined are negotiating in the hope of constructing smelters without being fined. Smelters built with IUI are completed faster and have shorter processes than IUP OP. Indonesia currently has 14 integrated mineral smelter projects with a total investment of US$8.69 billion (approximately Rp144.02 trillion), mainly in the bauxite sector, including 6 integrated bauxite smelter projects under construction with an investment of US$2.18 billion.7 bauxite smelters are being constructed at a pace lower than 60%, of which PT Kalbar Bumi in Sangkor, West Kalimantan Province Perkasa license has been revoked. Subject to domestic production constraints, theCastle Peak Holdings GroupLtd., Shandong Nanshan Aluminum and other Chinese companies are turning their attention to Indonesia, Southeast Asia's largest economy, and investing heavily in new smelters and refineries. Goldman Sachs Group expects Indonesia's aluminum capacity could grow fivefold by the end of this decade. The director of the consulting firm believes that Indonesia will become the center of gravity of the global aluminum industry in the next five years.