Anggi M. Lubis and Linda Yulisman, The Jakarta Post, Jakarta | Business | Wed, November 20 2013, 12:37 PM
Two of the world’s leading commodities players plan to set up ore refineries in Indonesia to take advantage of the country’s policy banning unprocessed ore exports, beginning next year.
Senior executives of the two companies, the world’s fourth-biggest diversified miner, Glencore Xstrata, and the world’s biggest aluminum producer, United Company RUSAL, expressed their interest, respectively, to Industry Minister MS Hidayat and Coordinating Economic Minister Hatta Rajasa during separate meetings on Tuesday.
Speaking to reporters after meeting Glencore’s CEO Ivan Glasenberg, Hidayat said that the firm had already carried out a feasibility study on building facilities to process bauxite and nickel ore locally.
He declined to elaborate on the size of the investments or the locations of the refineries, but estimated that one refinery might cost US$1 billion and suggested that they might be located in the eastern part of the archipelago.
“Glencore asked about our commitment to consistently implement our mineral-export ban. If we are committed to the ban, it will invest in Indonesia to build processing facilities for bauxite and nickel,” he said at his office.
Glencore, which is listed on the London Stock Exchange and headquartered in Switzerland, would be likely to build and operate its smelter in cooperation with a local firm, Hidayat said.
With the ban, slated for early January next year, Indonesia, one of the world’s biggest exporters of natural commodities, including nickel and coal, hopes to increase the added value of the country’s mineral output.
The development of the domestic nickel ore processing industry will bring 105-fold added value in terms of price, a study by the ministry has shown. According to the study released last year, Southeast Asia’s biggest economy holds proven nickel reserves totaling 577 million tons, but most of the output is exported in the form of unprocessed ore.
Hidayat did not explain when Glencore would start the construction of the smelter, but said that if it went ahead with its plant, it would need about 2.5 years to build the smelter, which would export most of its production. The firm might immediately submit its proposal to the government, he added.
At the other meeting, RUSAL CEO Oleg Deripaska met with the coordinating economic minister, to convey its plan to construct refineries and smelters costing $6 billion in West Kalimantan.
Earlier, industry officials revealed that RUSAL would produce about 1.8 million tons of alumina each year and the output would be sold on the domestic market.
The Russian company would team up with local partners to build and operate the refineries.
Despite its abundant bauxite deposits, Indonesia now imports alumina from Australia to supply Indonesia Asahan Aluminium (Inalum), which operates the only aluminum smelter in Southeast Asia.
Several years ago, RUSAL announced its plan to join forces with state-owned mining firm
PT Aneka Tambang (Antam) to establish a $1 billion bauxite refinery in Tayan, West Kalimantan, but the plan was canceled due to several reasons, including the world economic crisis.
Late in October, Antam, with its Japanese partner Showa Denko K.K., officially commenced operations at its chemical-grade alumina (CGA) plant located in Tayan, West Kalimantan, three months earlier than scheduled.
The plant will produce 300,000 tons of alumina per year, with 200 types of products, of which about 200,000 tons will be exported to Japan and the remaining 100,000 tons will be sold on the domestic market and other markets outside Japan.
Construction of the CGA plant, at a cost of $490 million, began in 2011 and is the first smelter completed after the country issued the 2009 Mining Law banning ore exports.