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Indonesia's Ban on Bauxite Exports Leads to Negative Effects, Surplus Bauxite Difficult to Consume

iconFeb 2, 2024 10:41
The implementation of Indonesia's ban on bauxite exports since June last year has led to bauxite surplus, brought challenges to consume domestically as the Indonesia's alumina plants have limited capacity. Ronald Sulistyanto, Chairman of the Indonesian Bauxite and Iron Ore Entrepreneurs Association (Asosiasi Pengusaha Bauksit dan Bijih Besi Indonesia - APB3I), highlighted the struggle to secure external investment for alumina plant projects, while some entrepreneurs are forced to cut costs or halt production. However, there is hope for relief through potential relaxation of the export ban policy. Efforts are underway to boost alumina production capacity, although challenges persist in addressing the surplus bauxite issue.

Since the issuance of the bauxite export ban policy in Indonesia last June, entrepreneurs have been experiencing a cash flow crunch due to difficulties in bauxite sales, as the country's alumina plants still have limited capacity to consume the surplus bauxite domestically. Ronald Sulistyanto, Chairman of the Indonesian Bauxite and Iron Ore Entrepreneurs Association (APB3I), revealed on January 26, 2024, that it is currently challenging to secure external investment for Indonesian alumina plant projects, as banks or financial institutions often perceive low feasibility in bauxite smelting plant projects.

According to Ronald, based on data from APB3I, Indonesia's bauxite production can reach up to 30 million tons annually. However, the country's capacity for processing/purifying bauxite into alumina remains limited.

As of now, Indonesia's nationwide planned metallurgical-grade alumina capacity reaches 12 million tons per year, while the planned capacity for chemical-grade alumina (CGA) plants ranges from 1 to 2 million tons per year. This has led some bauxite entrepreneurs to resort to cost-cutting measures or even delaying or halting production. Ronald believes that layoffs may be the best option for Indonesian bauxite companies facing such circumstances.

Ronald also expressed hope for the government to relax the export ban policy, which could assist entrepreneurs in completing their smelting plant projects. With export relaxation, entrepreneurs can resume production and earn profits.

According to data from the Ministry of Energy and Mineral Resources (ESDM), there are currently four alumina smelting plants in operation with a production capacity of 4.3 million tons. Currently, to increase alumina production capacity, the Indonesian government, through the Ministry of Energy and Mineral Resources, Mining and Coal Bureau, is attempting to encourage the expedited completion of eight alumina plants under construction. These eight smelting plants are located in various regions, including PT Borneo Alumina Indonesia in Mempawah, West Kalimantan, PT Laman Mining in Ketapang, West Kalimantan, PT Kalbar Bumi Perkasa in Sanggau, West Kalimantan, PT Quality Sukses Sejahtera in Kudian, PT Persada Pratama Cemerlang in Sanggau, PT Parenggean Makmur Sejahtera in East Kotawaringin, PT Sumber Bumi Marau in West Kalimantan, and PT Dinamika Sejahtera Mandiri in West Kalimantan. According to available information, these eight alumina plants are expected to consume 24.5 million tons of bauxite and produce approximately 8.5 million tons of alumina upon commencement of production.

Eddy Soeparno, Vice Chairman of the Indonesian House of Representatives, stated on January 28 that to address the current surplus of bauxite, the House will also discuss alumina plant issues in the Senayan area during the seventh committee meeting.

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