The state-owned aluminium giant PT Inalum of Indonesia called on the government on Tuesday to suspend the construction of new alumina and aluminium plants, citing concerns over oversupply and the pressure on the country's bauxite reserves.
Indonesia, which is rich in resources, is keen on promoting the development of its domestic metal industry and has banned the export of raw materials to encourage investment in domestic factories.
The rapid investment in nickel smelters has made Indonesia the largest exporter of nickel products. Analysts say that investors are now turning their attention to the aluminum industry.
Inalum's CEO, Melati Sarnita, stated that Inalum is concerned that the aluminum industry, after experiencing rapid growth, will encounter similar problems as the nickel industry, such as oversupply affecting global prices and environmental issues.
Inalum cited market data to estimate that once all the ongoing alumina projects commence operation, Indonesia's alumina production capacity will increase from the current approximately 9 million tons to 29.8 million tons.
Melati stated that once all the projects are completed, the original aluminum production capacity is expected to increase from the current 113 million tons to 149 million tons. This will result in an increase in the demand for raw material bauxite from the existing refineries from the current 36 million tons per year to 94 million tons.
These capacity expansions will put pressure on Indonesia's bauxite reserves, as the demand intensity may shorten the lifespan of the already discovered bauxite reserves to just 10 years. "Furthermore," he said, "as a state-owned aluminum company, when we build a smelter, we hope that the availability of bauxite reserves can ensure the smelter's operation throughout its entire 30-year lifespan."
Furthermore, there is still uncertainty regarding global aluminum demand at present. The aggressive expansion in Indonesia may put pressure on global prices.
