Southeast Asia 11 COUNTRIES IN ASEAN. as ASEAN Economic Community in 2015 TIMOR LESTE. After 2013

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2 Southeast Asia 11 COUNTRIES IN ASEAN as ASEAN Economic Community in 2015 TIMOR LESTE 2

3 ASEAN FREE TRADE AGREEMENT ASEAN-China Free Trade Agreement (ACFTA) 2005 ASEAN-India Free Trade Agreement (AIFTA) 2010 INDIA CHINA KOREA ASEAN-Korea Free Trade Agreement (AKFTA) 2007 JAPAN ASEAN-Japan Comprehensive Economic Partnership (AJCEP) 2008 FTA will Lead to Non-Tariff, diminish trade barriers, give Challenge & Potential to Growth ASEAN ASEAN Free Trade Area (AFTA) Established 1992, realized Jan 2010 ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) 2010 AUSTRALIA NEW ZEALAND 3

4 TRADE PARTNERS India 3% Republic of Korea 4% Australia 3% Taiwan 3% Hong Kong 7% USA 9% EXPORT *) Others 13% EU-27 10% Intra-ASEAN 26% Japan 12% China 10% Australia 2% India 2% Taiwan 4% Hong Kong 1% Republic of Korea 6% USA 8% IMPORT *) Others 19% EU-27 10% Intra-ASEAN 24% Japan 11% China 13% Extra- ASEAN 76% 2003 Intra- ASEAN 24% Extra- ASEAN 75% 2011 Intra- ASEAN 25% China and Japan become the top Extra-ASEAN Trading Partner Trade Partner Intra-ASEAN tends to increase in the future Source : ASEANstats, ASEAN Secretariat *) 2011 Figure 4

5 Regional Indicators South East Asia Indicators Indicators e 2013f 2014f Nominal GDP, US$bn Population, mn GDP per capita, US$ Real GDP Growth,% Inflation, % Goods Exports, US$ Good Imports, US$ Source: Business Monitor International, Vol 24 Issue 3, March

6 Real GDP growth Southeast Asia, China & India (%) Annual Percentage Changes ASEAN-6 countries Brunei Darussalam Indonesia Malaysia Philipines Singapore Thailand CLMV countries Cambodia Lao PDR Myanmar Vietnam ASEAN-10 average CLMV average Emerging Asia Average China and India China and India India ASEAN, the Association of Southeast Asian Nations, looked like a potential powerhouse for growth Rapid growth in Southeast Asia, China and India over the past two decades has produced a remarkable expansion in the middle class Source: SOUTHEAST ASIAN ECONOMIC OUTLOOK 2013 OECD

7 Leading Indicators ASEAN continues to show resilience despite ongoing global uncertainty, while that of China and India are slowing Domestic demand, backed by private consumption and infrastructure spending, continues to drive overall ASEAN growth even as they face lower external demand for their exports Source: OECD Development Centers Asian Business Cycle Indicators (ABCIs), Vol.10 January March

8 SE ASIA BAUXITE RESOURCE MALAYSIA: 18 Million Tones (Indicative Reserves ) VIETNAM: 4,175 Million Tones (Excludes possible resources) INDONESIA 552 Million Tones ( Resources ) 8

9 Aluminium Smelter, Alumina Refineries & Bauxite Mining in Southeast Asia ASAHAN (INDONESIA): ALUMINIUM SMELTER PT. INDONESIA ASAHAN ALUMINIUM CAP.: MT PROD: MT TAN RAI (VIETNAM): ALUMINA REFINERIES VINACOM CAP.: MT/Yr INITIAL RAMP-UP BINTULU (MALAYSIA): ALUMINIUM SMELTER PRESS METAL SARAWAK Sdn Bhd CAP.: MT PROD: MT JOHORE (MALAYSIA): BAUXITE MINING JOHORE MINING STEVEDORING CAP.: MT PROD: MT BINTAN ISLAND(INDONESIA): BAUXITE MINING PT. ANEKA TAMBANG TBK PERMANENTLY CLOSED TAYAN (INDONESIA): ALUMINA REFINERIES PT. ANEKA TAMBANG UNDER CONSTRUCTION 9

10 Production Chain Smelter Grade Alumina >>In Process of Construction in Indonesia Currently Southeast Asia still does not have the industry to produce Aluminium Plates, Billets, Slaballoy but in near future these will be built & produced 10

11 Primary Aluminium Consumption ASEAN-5 Y2001~Y2009 CAGR 6% And estimated growth could reach 9% per year 43% 42% kt 1200 ASEAN % 3% 3% 4% 4% China Japan ASEAN-5 Rest of World India Korea, Rep. of Other Asia Source; Calculated from ABARE data, % consumption on Y2009, *ASEAN-5:Indonesia, Malaysia, Philippines, Singapore, Thailand data Year 2001~

12 Aluminium ASEAN TRADE Aluminium Trade Commodity still has small portion from ASEAN Commodity Trade Intra-ASEAN = 0.6 % ; Extra-ASEAN = 0.7 % Total ASEAN = 0.7 % Source: ASEAN Statistics, Intra- and extra-asean trade by commodity group,

13 Aluminium Consumption/Capita Consumption per capita, in kilogram Even though Aluminium consumption in ASEAN is still far below Japan, Korea, Europe and the United States but will likely increase in the future by increasing of GDP per capita 5 0 Indonesia Philippines Vietnam India Thailand China Rep. of Korea Spain Italy Germany Canada - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 GDP per capita, in dollars Japan France UK US Source: USGS 13

14 Aluminium Consumption/Capita EXPECTED TO CONTINUE TO GROW IN THE FUTURE GDPpp/ Capita (US$) Al /capita (Kg) GDPpp/ Capita (US$) Al cons./ capita GDPpp/ Capita (US$) Al cons./ capita GDPpp/ Capita (US$) Al cons./ capita China 6, India 3, Japan 30, ASEAN-4 Indonesia 3, Philippines 5, Vietnam 3, Thailand 8, Source: USGS 14

15 ASEAN Infrastructure Spending Projected Need for Infrastructure Spending: ASEAN , US$ billion Water & Sanitation, 26 Roads, 128 Railways, 119 Ports, 33 Power, 228 Airports, 16 Source: Goldman Sachs Global Economics, Commodities and Strategy Research, Asia Economics Analyst, Issue No. 13/18, May 30,

16 ASEAN Infrastructure Spending Quality of Overall Infrastructure World Rank Singapore, Japan, The main driver behind the growth in aluminium consumption in the Southeast Asian Countries has been the Construction Sector (Infrastructure) Malaysia, 29 Australia, 36 Brunei Darussalam, 43 Thailand, 49 China, 69 India, 87 Indonesia, 92 Philippines, Vietnam, = Extremely Underdeveloped; 7= extensive and efficient by International Standards Source: World Economic Forum, The Global Competitiveness Report

17 ASEAN Automobile & Transportation As a region ASEAN is likely to become 8 th largest Automotive Market in 2018, Growth at a compound annual growth rate (CAGR) of 10% from 2011 to 2018, mainly driven by growth in Thailand and Indonesia. 17

18 I n d o n e s i a INDONESIA 18

19 Indonesia Economic Growth & The World The Economic Growth *) World economic growth Central and Eastern Europe ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam) The Economic Growth of Indonesia **) *) Projected by IMF **) Max.Target by Indonesia Government (5.8~6.2) 19

20 MACRO ECONOMIC INDICATORS Population : million (2012) Annual Growth Rate : 1.7% (2010~2012) 4 th Largest Population in the World According to Asian Development Bank: >> Indonesia is now a middle-income country, the 16 th largest economy in the world, and the biggest economy in ASEAN. >> Despite turbulent global economic conditions, Indonesia s economy remain resilient. >> GDP Growth has been consistently robust with investment, private consumption and government spending as the main drivers 20

21 INDUSTRY INVESTMENT GROWTH Domestic Investment (CAGR 2008~2011 = 24.7%) Foreign Investment (CAGR 2008~2011 = 10.7%) Source: Ministry of Industry Rep. of Indonesia, BKPM (Processed) 21

22 ALUMINA and ALUMINIUM BAUXITE & ALUMINA: BAUXITE : Resources = 551,961,397 tons Deposit = 179,503,546 tons (7 th Largest in the World) Production = 15,490, tons (2010) (4 th Largest Producer in the World) Processing Industry (Alumina Refinery)= SGA PT. Antam (2014): 4,000,000 t/yr CGA PT. Antam (2014): 1,100,000 t/yr Harita Prima Abadi (2014): 2,000,000 t/yr Kalimantan Source: Ministry of Energy and Mineral Resources Rep. of Indonesia 22

23 ALUMINIUM : ALUMINA and ALUMINIUM MT 500,000,000 Aluminium Ingot Demand*) Aluminium Ingot Import Value *) Million US$ 1, ,000, ,000, ,000, ,000, *) Unwrought aluminium (not alloyed & alloys) Source: BPS & PT. Inalum (Processed) Demand for aluminum ingot in Indonesia has increased significantly every year since 2005~2012 with a growth of 22.3% and is indicated also by the significant growth of the value of imports at 24.6%. This condition will continue with the growing trend in the future as a signal that Indonesia has potential for significant growth in the market for aluminum. 23

24 ALUMINIUM : Foil 5% ALUMINA and ALUMINIUM Rod 13% Ingot (Primary) 26% Alloys 28% Others 2% Sheet 30% Sheet 18% Scrap Alloy 21% Extrusion 17% Source: PT. Inalum & Ministry Industry of Indonesia (Processed) Cable & Rod 17% Extrusion 23% Indonesia composition of aluminum production capacity according to the product (2010) Proportion Aluminium Ingot Demand of Primary Al. Ingot Downstream Industry According to Ministry Industry of Indonesia, there are about 76 companies as Aluminium Producer with total capacity about 869 million ton per year (Y2010) with various of product and PT. Inalum is the only manufacturer of Primary Al. Ingot. Other Producers become Downstream Industry for PT. Inalum. Next concern: In order to connect large bauxite resources and consumption of end products such as rod, bar, billet, slab and strip, smelter to produce alumina is need to be build and Industry need to develop from upstream to down-stream 24

25 GOVERNMENT POLICY & REGULATIONS GOVERNMENT POLICY : Policy to Support manufacturing Industry Added Value DMO (Domestic Market Obligation) Master Plan Acceleration & Expansion Indonesia Economic Development Source: Ministry of Energy and Mineral Resources Rep. of Indonesia Government policies, especially for the processing and exploitation of non-renewable natural resources are directed to give priority to the national interest in order to achieve the target Master Plan Acceleration & Expansion Indonesia Economic Development through the development of processing industries that provide added value and giving the priority to sell the product in order to meet domestic market demand first (Domestic Market Obligation). 25

26 GOVERNMENT POLICY & REGULATIONS GOVERNMENT POLICY : Added Value Chain Source: Ministry of Energy and Mineral Resources Rep. of Indonesia Tax Holiday Policy for Certain Industry: For Capital Intensive Industry and having a great multiplier effect to the national economy 26

27 GOVERNMENT POLICY & REGULATIONS REGULATIONS: Law of The Republic of Indonesia No. 4 of 2009 Concerning Mineral and Coal Mining Regulation of The Government of The Republic of Indonesia No. 20 of 2010 Concerning Implementation of mineral and Coal Mining Business Activities Mining Resources Regulation of the Minister of Energy and Mineral Resources N0. 39 of 2009 concerning Prioritization Mining Supply Requirements for Domestic Interests Regulation of The Government of The Republic of Indonesia No. 1 of 2007 jo 62 of 2008 Concerning Income Tax Facility for investment in certain industries and / or in certain areas Industry Regulation of The President of The Republic of Indonesia No. 28 of 2008 Concerning Policy of National Industry Regulation of the Minister of Finance N0. 39/PMK/2009 Concerning exemption of import duty on machinery as well as goods and materials for the construction or development of industry in the context of investment Government Policies and Regulations had been provided & Expected to Influence Growth in the next Year 27

28 Downstream Aluminium Industry in North Sumatra 28

29 EXISTING CONDITION: Electricity in North Sumatra Electricity Transmission using 150 kv Supply Ability MW, Peak Load MW Population Growth 1.7% per Year Social 4% Government 1% PJU 2% Industry 21% Commercial 17% Household 55% Electricity Consumption Sector Source : BPS, State Electrical Company of Sumatera Utara (PT. PLN Sumut) Electricity Power Mostly consumed by Household, Industry & Commercial Sector in North Sumatra. In Peak Load Shortage Power shall be happen. Due to Large Demand every year Electricity Power Source Shall be Developed shortly 29

30 Electricity in North Sumatra Power Installed % 7% 6% Diesel Power (PLTD) Steam Power (PLTU) MW % Steam Power (PLTU) Source : State Electrical Company of Sumatera Utara (PT. PLN Sumut) 44% 17% Combine Cycle Power (PLTGU) Power Mini Hydro (PLTM) Hydroelectric Power (PLTA) There are various energy power plant and sources in North Sumatra and in near future geothermal power plant (PLTP) shall be constructed. This conditions every year will grow significantly 30

31 Electricity in North Sumatra Map of North Sumatra Electricity (Existing & Planning): until 2019 there will be 30 power plants with a total capacity 3,004 MW shall be developed Source : BPS, State Electrical Company of Sumatera Utara (PT. PLN Sumut) 31

32 INALUM in North Sumatra Kuala Tanjung - Kuala Tanjung where PT. Inalum was located - Planned become Industrial Area to develop Aluminium Cluster Industry - Become one of International hub of Indonesia ( International Sea Port will be built in near future) - Steam Power Plant Shall be built at Kuala Tanjung (225 MW) 32

33 Aluminium Industry No Name of Company Kind of Product Installed Capacity (MT/Month) Capacity Used (MT/Month) 1 PT. Damai Abadi Extrussion 1, PT. Inti Bumi Al. Sheet, Al. Foil 2,000 1,200 3 PT. Sanyo Brake Spare part Motor Cycle PT. Alfo Citra Extrusion, Houseware 8,000 4,800 5 PT. Indotecno Extrusion, pipe PT. Mewah Indah Jaya Houseware PT. Sinar Alakasa Extrusion & Profile PT. Cakra Compact Al. Billet, Extrusion PT. Intan Nasional Seng,pipe,strapping 12, CV. Jaya Perkasa Abadi Extrussion PT. Metalindo Wahana P Extrussion Total 24,750 7,195 The Primary Aluminium Ingot Downsream Industry has been developing in North Sumatra since Inalum operated in Kuala Tanjung 33

34 INALUM and Its Business Plan 34

35 Mapping of INALUM 35

36 Master Plan of Kuala Tanjung Industrial Zone 36

37 Value Chain of Aluminium Industry Item Unit SGA Plant Smelting Plant Al-Downstream Total Conversion: Bauxite to Alumina Alumina to Aluminium Aluminium become end product Added Value $/t ~300 ~1,750 ~1,000 ~3,050 Capex $/t capacity 1,000 ~1,500 1,500 ~ 10, ~ 1,000 $/t product 100 ~ ~ ~ 40 Opex $/t product 100 ~180 1,000 ~ 2,000 1,800 ~ 2,200 Total Production Cost $/t product 250 ~ 330 1,075 ~ 2,333 1,820 ~ 2,240 Electric Consumption Kwh/t 300 1, Electric Intencity prs/1000 t-capacity < 0.8 < 10 <

38 Un-connected Chain Integration of aluminum industry conducted by connecting the un-connected chain: Alumina Refinery, CTP Plant, Coke Plant, Development of Hydroelectric /Steam-Electric(Coal) Power Plant and development down-stream industry through Product diversification 38

39 Indonesia Aluminium Supply and Demand Source: PT. Inalum & S.B. Abdinagoro A gap (disparity) between national demand and supply of primary aluminum capacity due to increased demand will double by 2013 to 2023 period. With the expansion of existing production capacity gap will be reduced 39

40 Grand Strategy Development of PT. INALUM with the following alternative strategy: 1. To become independent state owned enterprises 2. To become independent state-owned enterprises and the subsidiaries in synergy with other entities 40

41 Objectives & Development Strategy Objectives: To increase the production capacity of 250,000 MT become: - Phase I : 325,000 t/yr in year Phase II : 650,000 t/yr in year 2023 Development Strategy: 1. Efficiency improvement and optimization of existing resources 2. Enhancement of Production Capacity of Smelter and Power Plant as well as integration with SGA and CPC Plant 41

42 Improvement of Efficiency, Capacity and Integration 1. Efficiency and Optimization a. Upgrading Technology : 250,000 t/yr to 264,000 t/yr (Current 235 ka, CE 93%) b. Premium Price - Ingot : 5% LME (+60%: products which previously sold to Japan) - Product Diversification : 10% LME ( Alloy, Slab, Billet) c. Selling Anode: 30,000 t-anode/yr 2. Production Capacity Improvement & Integration Next Activities Current Phase-I Phase-II a. Production Capacity Improvement 250,000 t/yr 325,000 t/yr 650,000 t/yr b. Developing of Hydroelectric & 71.5 x 4 MW & 2 x 100 MW 2x200 & 2x90 MW Steam Power Plant 79.2 x 4 MW c. SGA Plant Investment ( 30% share) - 1,000,000 t/yr - d. Constructing of CPC Plant (70% Equity) - 100,000 t-cpc/yr 100,000 t-cpc/yr 42

43 Investment and Funding 43

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