Seven more companies ready to build smelters

JAKARTA. The Energy and Mineral Resources Ministry announced over the weekend that seven more companies have expressed interest in building mineral smelting plants in Indonesia.

These additions bring the total number of smelters queuing up to be built to 26, up from the ministry’s previously reported number of 19 companies that have submitted plans to build mineral and coal processing facilities across the country.

“There are seven more companies which have proposed plans to build smelters in Indonesia, including investors from China and Korea. Thus, now, we have 26 companies in total which have committed to building smelters,” said the ministry’s director general for minerals and coal, Thamrin Sihite, in Jakarta.

However, he declined to disclose the names of the companies.

Thamrin continued that as of today, the government had no plan to provide more incentives for companies planning to build smelters. He claimed the current incentives, such as tax holidays, were stipulated in the 2011 government regulation on tax facilities for investments in certain fields and regions.

The director general emphasized that the government never obliged all mineral and coal mining companies to build their own processing and refining facilities, but they could join forces to build a smelter to be used together.

“Processing and refining raw materials will benefit the companies. For instance, if bauxite is processed and refined into alumina, the value will jump by seven times compared to selling it in the form of ore,” he said.

The construction of new smelters has been motivated by with the 2009 Minerals and Coal Law, which bans exports of unprocessed metal starting 2014. The government has also issued a ministerial regulation to affirm the law on Feb. 6.

The Energy and Mineral Resources Ministry has given three months for all mining companies to submit comprehensive plans to comply with the export ban, otherwise their export permits would be temporarily frozen.

According to the ministry’s data, the 19 new smelters will begin commercial operation between 2012 and 2017. Of the 19 facilities, seven are now in the construction phase, six under examination for feasibility and the remaining six have just obtained construction permits. The chairman of the Indonesian Mining Association (Perhapi), Irwandi Arif, urged the government to accelerate smelter construction projects to meet the 2014 deadline.

“In addition to accelerating the construction of the smelters, the permit issuance and incentive provision should also be accelerated. Related government institutions must strengthen coordination to do that,” he told reporters over the phone.

Separately, Deputy Energy and Mineral Resources Minister Widjajono Partowidagdo suggested that the government cut mining companies’ export quota to the level prior to the implementation of the 2009 law.

“Since the law bans metal ore exports in 2014, many companies have boosted their exports and some of them have even recorded a 900-percent increase in exports. That is dangerous,” he said at his office on Friday.

“The government has the responsibility to control exports, or our natural resources will run out earlier than we estimate,” he added.

The ministry’s data shows that in 2011, Indonesia’s bauxite exports reached nearly 40 million tons, jumping from 27 million tons in 2010, 16 million tons in 2009 and 13.5 million tons in 2008.

For iron ore, exports hit 13 million tons in 2011, up significantly from 8 million tons in 2010, 7 million tons in 2009 and 2 million tons in 2008. Nickel exports touched 33 million tons last year, rising steeply from only 17 million tons a year earlier. Nickel export levels were at 11 million tons in 2009 and 4 million tons in 2008. (Rangga D. Fadillah/ The Jakarta Post)