By Dominikus
A key issue has emerged among Indonesian alumina industry stakeholders: one of the primary obstacles to the development of smelter-grade alumina (SGA) and chemical-grade alumina (CGA) plants is the uncertainty surrounding long-term raw material supplies, specifically bauxite ore and caustic soda. Caustic soda, or sodium hydroxide (NaOH), is a critical chemical compound used in alumina production to dissolve bauxite.
In light of this, Petromindo.com reached out to industry stakeholders, including the government, associations, and alumina producers, to understand why bauxite supply remains such a pressing issue. This is particularly surprising, given data from the Geological Agency in 2023, which shows that Indonesia holds 7.4 billion tons of bauxite resources, with reserves of 2.7 billion tons.
“We still face challenges securing sufficient bauxite supply,” said Santony, Non-Executive Director of PT Bintan Alumina Indonesia, to Petromindo.com on December 14. Bintan Alumina has invested in producing 2 million tons of alumina annually in Indonesia. The company is expanding its capacity to 4 million tons per year, with the third million tons set to come online in the second half of 2025 and the fourth million tons in the second half of 2026. Bintan Alumina sources its bauxite supply from PT Mahkota Karya Utama (MKU), a stakeholder holding a 2.3% interest. MKU has committed to supplying 3 million tons of bauxite in 2025 and 4.5 million tons in 2026. However, for its existing 2-million-ton-per-year smelter-grade alumina plant, Bintan Alumina requires 5–6 million tons of bauxite annually.
A similar concern was shared by Zhou Wei, President Director of PT Well Harvest Winning Alumina Refinery (WHW), in a late November interview with LittleLee’s Value Investing. Zhou noted that bauxite supply in Indonesia remains unstable due to a lack of detailed feasibility studies by many miners and the potential for government-imposed mining quota cancellations, forcing WHW to seek alternative suppliers. WHW has reportedly refrained from considering expansion due to concerns over bauxite supply, although Petromindo.com notes that WHW had previously revealed plans to develop a total capacity of 4 million tons per year. WHW is 61% owned by China Hongqiao Group Limited and 30% by PT Cita Mineral Investindo Tbk, which is 60.64% owned by PT Harita Jayaraya. In 2023, Cita supplied 4.67 million dry metric tons (DMT) of bauxite to WHW at an average price of $40.86/DMT. WHW consumes approximately 2.4–2.5 tons of bauxite to produce 1 ton of alumina.
“Yes, many companies are planning to build alumina plants, but bauxite supply remains a major issue,” shared Wen Yang, Senior Engineer at CINF Engineering Corporation Limited (a Chalieco subsidiary), when asked by Petromindo.com on December 15.
Bauxite pricing and export ban
Petromindo.com also reached out to AP3BI, the Indonesian bauxite producers' association, to verify these challenges. “The issue is not a lack of stock. Miners are reluctant to produce because the price is very low and almost causes losses, while alumina prices are extremely high, which creates an imbalance. Looking at the annual quota, there are still about 12 million tons of production left this year. The supply of raw bauxite is sufficient until the relevant Building Use Rights (HGB) expire. We have 1.7 to 2.1 Billion tons of reserves, not to mention those in the Industrial Forest zones or under Business Use Rights (HGU),” said Ronald Sulistyanto, Acting Chairman of AP3BI, in a statement to Petromindo.com on December 14. He added that bauxite mining companies are currently reluctant to produce because they are no longer allowed to export.
As is well-known, the Indonesian government imposed a ban on bauxite ore exports starting June 11, 2023. This policy, initiated by former President Joko Widodo, aims to promote downstream industries and increase the added value of Indonesia’s natural resources, in line with Law No. 3 of 2014 on Industry.
“If smelters or refineries used the Mineral Benchmark Price (HPM), the supply would be stable because miners would profit. That’s why, if exports were allowed, miners would be very active in producing bauxite. To secure raw materials, long-term master contracts of 3–5 years should be made. The price is typically around $25–30 per ton, while the HPM is set at $42,” Ronald explained.
In response, Siti Sumilah Rita Susilawati, Secretary of the Directorate General of Minerals and Coal at the Ministry of Energy and Mineral Resources (MEMR), emphasized the government’s commitment to monitoring and regulating domestic ore prices to ensure fair pricing for both suppliers and users. “The government continues to monitor and supervise the sale price of ore domestically to ensure raw material prices are maintained and beneficial for both suppliers and users. Regarding bauxite sale prices, the Directorate General of Minerals and Coal has issued Circular Letter No. 4.E/2024, which essentially regulates the use of HPM for bauxite sales,” Siti stated to Petromindo.com on December 14.
Alumina development progress
Since the restriction on bauxite ore exports, the smelter-grade alumina and chemical-grade alumina industries are expected to grow rapidly in Indonesia, driven by domestic demand and the export market.
However, as of the publication of this analysis, only Bintan Alumina, with a capacity of 2 million tons per year, has begun production, following WHW, which also operates with a capacity of 2 million tons per year. Meanwhile, PT Borneo Alumina Indonesia (Borneo Alumina) is expected to begin operations in the first quarter of 2025. For chemical-grade alumina smelters, only PT Indonesia Chemical Alumina (ICA) is currently operating, with an annual production capacity of 300,000 tons of CGA. SGA is the raw material used for producing aluminum ingots.
"The national demand for aluminum ingots is currently around 1.2 million tons per year, of which about 274,000 tons per year can be supplied by domestic smelters. The utilization of aluminum ingots in the transportation and building sectors accounts for approximately 47% to 52%, packaging 13% to 18%, electronics 9% to 13%, machinery and equipment 9% to 11%, and other sectors around 10% to 12%," said Ginanjar Mardhikatama, Team Leader of the Non-Ferrous Metal Industry at the Ministry of Industry, during a CSIS Public Discussion on November 29.
While reports suggest that alumina plant development in Indonesia has been relatively stagnant, research from Petromindo.com, supported by company announcements and interviews, indicates ongoing progress in several key projects. Much of the investment is led by Chinese companies, reflecting their commitment to expanding Indonesia’s role in the global supply chain. Among the notable developments is the expansion of Bintan Alumina’s production capacity, which aims to reach four million tons per year. Similarly, Press Metal Aluminium Holdings Berhad, through its Indonesian subsidiary PT Kalimantan Alumina Nusantara, is targeting an annual capacity of over one million metric tons. Other projects include land preparation for a 2-million-ton-per-year alumina facility by Tianshan Aluminum Group through PT Tianshan Alumina Indonesia and the first-phase construction of a large-scale alumina plant by Hangzhou Jinjiang Group under PT Borneo Alumindo Prima, which is expected to produce between four and six million tons annually. Additionally, Aluminium Bahrain B.S.C. is conducting feasibility studies for a significant alumina project in West Kalimantan under PT Green Indonesia Alumina, while East Hope Group is advancing land clearing efforts for a new plant under PT Westerfield Alumina Indonesia.
In his presentation, Ginanjar stated that alumina and aluminum-based industries are shifting toward green energy, as demonstrated by PT Inalum (Persero) in producing its aluminum. “For the aluminum industry, the current trend is green aluminum, where the supplied aluminum must use renewable energy. At Inalum, for example, they are already using hydropower plants,” added Ginanjar.
Conclusion: Investment, policy, and sustainability as catalysts for growth
At the National Investment Coordination Meeting 2024, Rosan Roeslani, Minister of Investment, reiterated Indonesia’s focus on downstream mineral processing, with an estimated $498.4 billion in investments by 2040. Ensuring raw material supply through strategic acquisitions, partnerships, and fair pricing mechanisms is essential for achieving this vision. Current alumina production costs stand at $230–240 per ton, with total costs below $270 per ton. Five years ago, costs were $180–190 per ton due to cheaper raw materials, labor, and higher bauxite stockpiles.
Indonesia must address key supply chain challenges to unlock its potential as a global alumina and aluminum powerhouse. Fair pricing mechanisms, increased caustic soda availability, and infrastructure improvements are critical for long-term sustainability. Moreover, the shift toward green energy offers new opportunities, as companies like PT Inalum (Persero) have demonstrated by using renewable hydropower to produce aluminum. As global demand for green aluminum rises, Indonesia’s alignment with renewable energy in aluminum production could position it as a leader in sustainable metal production.
The synergy between investment, policy, and industry collaboration will define Indonesia’s success in achieving its ambitious downstream goals. A stable pricing structure, coupled with strategic resource management, will be pivotal in turning its abundant bauxite reserves into a cornerstone of the global alumina supply chain.
Editing by Reiner Simanjuntak
