INDONESIA S REFINERIES: THE CHALLENGES CONTINUE

Transcription

1 INDONESIA S REFINERIES: THE CHALLENGES CONTINUE Henry BL Toruan, Ph.D, Vice Chairman Asahan Authority, Senior Lecturer of Business and Economics, at several Universities in Jakarta, Indonesia.

2 The Outline The Background; Indonesian Aluminum, Alumina, and Bauxite, in perspective; Major Countries Bauxite Reserves and Productions The ban; Overview of the Indonesia Mining Industry; Will the Ban Continue The longer-run transformation in the industry

3 Indonesia s Bauxite, Alumina, Aluminum in Perspective Average Production per Year Bauxite Alumina Aluminum Indonesia * China The World Sources: Derived from Statistica, the Portal Statistics. * = average annual production till 2013 (before the ban)

4 Major Countries' Bauxite Reserves and Productions (millions of tons) Average of Annual Productions Reserves Indonesia * 1,000 China Australia ,000 Brazil ,600 Guinea ,400 India Others ,250 World Total ,620 Sources: Derived from Statistica, the Portal Statistics. * = average annual production till 2013 (before the ban)

5 The Ban Applies to All Mineral Ores; Law No. 4 was enacted in 2009, and effected January The Law requires miners to first process the ores before exporting. The aims are to promote higher value added in the industry (articles 103 and 107), and better management of the environment (article 95).

6 How is the Indonesian Mining Industry Progressing; Policy Credibility; In transitional years ( ), miners were hesitant to start building smelters due to prior history of weak commitment of the GOI to its long-term plan n goal. The enforcement of the ban in 2014, nullify the doubt. Out of 178 planned smelters, 25 at its commisioning/operation stage, 37 at various stages of constructions, and the rest at F/S and environmental impact assessments. Some of those are alumina refineries, and one chemical grade alumina refinary already in operation.

7 Mineral Ores Development of Smelters and Refineries Percentage Stages # Licences 0-5 Feasibility Study Environmental Impact Assessment Ground Breaking Middle Stage Construction Final Stage Construction Commissioning/Pro duction Total 178 Sources: Ministry of Energy and Mineral Resources, 2014

8 Indonesia s Bauxite Ores in Particular Bauxite export stops, and preparation for developing refinaries started. One chemical grade alumina refinary is now in operation. Five smelter grade alumina (SGA) refineries are progressing, they are: PT. Alakasa Xinfa Group, a joint venture of local Alakasa with China s Xinfa Group Co LTD PT. Well Harvest Winning Alumina, a joint venture with China s Hongqiao and local Harita Group, expect to start operation by end of 2016 PT. Bintan Alumina Indonesia, a joint venture with China s Bosai, plan to start production in early 2017 PT. Inalum and PT Antam carry out a feasibility study for a joint venture alumina refinary project. Several more projects under discussion.

9 A Brief Look on Alakasa-Xinfa Project; A joint-venture PT. Alakasa Tbk n Xinfa Group Co.. LTD. Alakasa, a leading aluminum manufac and trading in Indonesia, provides 120 MT of best quality bauxite reserves. Xinfa, experienced w/ latest technology in alumina refinary. Vertical Integration: Bauxite supply, Alumina Refinary, and Aluminum smelter with PT. Inalum in discussion. Completed F/S, and expect to start construction by the end of 2015, and production in Capacity of 2 million MT per year. Location: West Kalimantan

10 The Ban Will Continue The new government will stick to promote Trisakti motto; Sovereign in politics, Self-sufficient In the fields of economics, and Personality in culture A strong opposition in parliament will urge the government to avoid any over-turn of major policy like the ban on mining. For the last several months there was a government s plan to ease the ban, but has recently scrapped the plan and decided to pursue all the way to develop downstream industry in the mining sector.

11 The Recently Launched Government s Policy Packages Only last week, the government launched the first of its three policy packages to counter the economic slow down. The policy packages are aimed to push industrial competitiveness by; Deregulation Debureaucratization Strengthening law enforcement to increase business certainty 79 government regulations are rewritten, 154 rule are elimated, those are the ones which hinder competitiveness.

12 Looking Into the Future of Indonesia s bauxite-alumina-aluminum industry Exports of Indonesia s Bauxite will continue to be disappeared. Indonesia s alumina production will enter the global market in Indonesia with bauxite mining capacity of 30 millions tpy, will supply approximately 7,5 millions tpy of alumina The only Indonesian aluminum smelter, Inalum, will produce thousands tpy aluminum by 2020 New aluminium smelters will emerge, considering a rise in demand for aluminium

13 A Glance at Recent Indonesian Economy, (in USD and percentages) * GDP Export Import Trade Balance CA Balance Growth Sources: Derived from BPS Data * estimated number n subject to change

14 Selected Industries Contribution to Indonesia s Economic Growth Industries Mining and Quarrying Agriculture, Livestock, Forestry and Fishery Manufacturing Other Sectors GDP Growth Source: Derived from BPS Data

15 Summary The Ban on exporting bauxite ores will sustain. Indonesia to continue build refineries and smelters in the years to come Prices of bauxite, alumina, and aluminum will eventually rise, and will induce more investments in the industry Indonesia s alumina and aluminium industry will enter the global market...

16 TERIMA KASIH THANK YOU