Inalum to build new smelter, boost output

JAKARTA. In a bid to double its production capacity by 2019, state-owned aluminium maker PT Indonesia Asahan Aluminium (Inalum) is planning to build a new smelter in the first half of this year, with estimated investment to reach US$1 billion.

Inalum development director Winardi Sunoto said on Thursday that the company was conducting a feasibility study, which was expected to be completed by the end of this year.

“As soon as the study concludes, we will continue with bidding to get contractors and complete other steps that may take between six and eight months,” he told The Jakarta Post on the sidelines of a smelter summit, adding that construction would kick off after the series of steps.

The planned smelter is designed to have a production capacity of 200,000 tons of aluminum ingots. As part of its gradual expansion plan, Inalum is upgrading the capacity of its existing smelter to 300,000 tons of aluminum ingots from 250,000 tons at present.

The expansion plan was born after the Indonesian government took over Inalum from Nippon Asahan Aluminium (NAA), a consortium of 12 Japanese firms, following the expiration of their 30-year contract.

Before the takeover, Inalum, which operated the only aluminum smelter in Southeast Asia, shipped 60 percent of its total output to Japan. The remaining portion was sold to domestic buyers who also relied on imports to meet high demand.

According to Winardi, the company will opt for syndicated loans and raise funds from bond issuance to finance smelter construction.

“We are examining the most competitive option to execute our expansion plan,” he explained.

Earlier reports said that Inalum would likely spend $2 billion on various development projects to include the new smelter, a 600-megawatt steam-fueled power plant to support its operation, a carbon factory in North Sumatra, and an alumina refinery in Mempawah, West Kalimantan, which it will jointly develop with state-owned miner PT Aneka Tambang (Antam).

The refinery, which is slated to produce smelter-grade alumina, will be essential to Inalum’s operations, as it will secure the raw material for aluminum ingot production, which will also double along with the firm’s significant capacity increase.

At present, Inalum imports around 500,000 tons of alumina from Australia to produce the alumina ingots, as the refinery is not available locally.

Winardi said that the firm expected to sell its total ingots domestically and stop exports next year amid surging national consumption and competitive edge in the delivery period thanks to its proximity with local buyers. The biggest output of Inalum now goes to its buyers in Jakarta, followed by those in Surabaya, East Java, and Medan, North Sumatra, which jointly absorb more than 200,000 tons of its overall production.

Domestic demand of aluminum ingots is estimated to reach 600,000 tons each year, but Inalum, which is the only aluminum smelter in the country, can only supply less than half of the figure, leaving the majority to imports. (Linda Yulisman)