Indonesia lowers projections for nickel and bauxite smelter construction by 30% due to investment shortfalls

The Energy and Mineral Resources Ministry of Indonesia has lowered its projections for nickel and bauxite smelter construction by 2022 due to shortfalls in investment. Indonesia’s government in September expedited the nickel ore export ban by two years to January 2020 from 2022 as part of its efforts to boost expansion of a local smelting industry. The government may consider accelerating an export ban on bauxite and other mineral items, depending on the scale of investment. Under the current rules, exports of bauxite are allowed till January 11, 2022.

The export ban, which was in place since 2014, was revoked in 2017 for a period of five years (until 2022) to give time to domestic miners to build their smelters to process minerals such as nickel, bauxite and copper.

Indonesia’s Minister for Maritime Affairs Luhut Binsar Pandjaitan recently said that Indonesia with its sixth-largest bauxite reserves in the world has a potential to expand its bauxite downstream business to 13 billion USD next year from the current 9 billion USD.

The president encouraged the development of the bauxite processing industry in the country. The collaboration of PT Indonesia Asahan Aluminum with PT Aneka Tambang Tbk via its subsidiary PT Borneo Alumina Indonesia (PT BAI) to build a bauxite-to-alumina plant in Mepawah, West Kalimantan was a step towards this.

The ministry initially expected 41 nickel smelters and 11 bauxite smelters to begin operation by 2022. However, investment shortfalls have brought down the expected numbers to only 29 nickel and 9 bauxite facilities less than a month before the nickel export ban starts officially. This means that about 30 per cent of the smelters are yet to be built and need investment in order to facilitate the ban productively.